Daily Brief For May 14, 2021

Daily commentary for U.S. broad market indices.

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Market Commentary

Index futures back in balance.

  • Selling slows, commodities take hit.
  • Ahead: A big day for data releases.
  • Index futures were higher overnight. 

What Happened: U.S. stock index futures auctioned higher overnight ahead of ECB minutes, data on retail sales, U.S. import and export prices, industrial and manufacturing production, business inventories, as well as sentiment figures.

Ongoing Theme: “Stocks with more attractive valuations and slower growth will do well in a higher-interest rate environment,” according to Louise Dudley, global equities portfolio manager at the international business of Federated Hermes. Expensive growth stocks, by contrast, “are sensitive to higher interest rates.” – Bloomberg

Graphic updated 7:00 AM EST.

What To Expect: Friday’s regular session (9:30 AM – 4:00 PM EST) in the S&P 500 may open just outside of prior -range and -value, suggesting a limited potential for immediate directional opportunity. 

Adding, during the prior day’s regular trade, the best case outcome occurred, evidenced by responsive trade up to and around the $4,117.00 POC, which is significant because it marked the most valuable price to trade at during a prior session.

POCs: POCs are valuable as they denote areas where two-sided trade was most prevalent. Participants will respond to future tests of value as they offer favorable entry and exit.

The rebound comes after violent downside discovery earlier in the week. After a failed balance-breakout, alongside weak economic data, the S&P 500 liquidated down to its balance-area low, a typical target on a failed balance break. Thereafter, prices were advertised below the balance area but did not attract aggressive sellers. Participants then rotated the index back inside the balance area suggesting they are seeking better prices to sell at or more information to base a directional move.

Further, for today, participants can trade from the following frameworks. 

In the best case, the S&P 500 trades sideways or higher; activity above the $4,133.75 50.00% Fibonacci retracement has the potential to trade up to the $4,177.75 high volume area (HVNode). Initiative trade beyond the HVNode could reach as high as the $4,227.00 POC. 

Volume Areas: A structurally sound market will build on past areas of high volume. Should the market trend for long periods of time, it will lack sound structure (identified as a low-volume area which denotes directional conviction and ought to offer support on any test). 

If participants were to auction and find acceptance into areas of prior low-volume, then future discovery ought to be volatile and quick as participants look to areas of high volume for favorable entry or exit.

In the worst case, the S&P 500 trades lower; activity below the $4,133.75 50.00% Fibonacci retracement puts in play the $4,122.75 HVNode, the $4,104.75 and $4,089.25 low volume areas (LVNodes), and lastly, the $4082.75 and $4,071.25 HVNodes. 

Trading below the $4,029.25 overnight low (ONL) suggests a continuation of the bear trend. Caution longs.

Overnight Highs (Lows): Typically, there is a low historical probability associated with overnight rally-highs (lows) ending the upside (downside) discovery process.
Graphic: 4-hour profile chart of the Micro E-mini S&P 500 Futures.
Graphic: Daily candlestick charts of the S&P 500 (top left), Nasdaq 100 (top right), Russell 2000 (bottom left), and Dow Jones Industrial Average (bottom right).
Graphic: Physik Invest maps out the purchase of call and put options in the SPDR S&P 500 ETF Trust (NYSE: SPY), for May 13. Activity in the options market was primarily concentrated in short-dated tenors, in strikes as low as $406.00, which corresponds with ~$4,080.00 in the cash-settled S&P 500 Index (INDEX: SPX).
Graphic: SHIFT search suggests participants were most interested in put strikes at and below current prices in the cash-settled S&P 500 Index (INDEX: SPX) and Nasdaq 100 Index (INDEX: NDX), May 13. Participants, unlike in prior sessions, are positioning themselves in longer-dated expiries suggesting more commitment. 

News And Analysis

COVID-19 | CDC lifts most mask guidance in a key step back to normal. (BBG)

Markets | The automotive chip-shortage cost estimate surges to $110B. (BBG)

COVID-19 | Singapore moves back toward lockdown as virus cases rise. (BBG)

Finance | JPMorgan, others to issue credit cards to people with no credit. (WSJ)

Housing | The U.S. housing market is hot — but Canada’s is even hotter. (FP)

Markets | Hedge fund titans pitch their top stock picks at Sohn Event. (BBG)

M&A | Canadian National Railway beat Canadian Pacific in KCS offer. (FP)

What People Are Saying

Innovation And Emerging Trends

FinTech | Musk well-positioned to steer cryptocurrency’s direction of travel. (FT)

Markets | Distressed HFs sit on cash and compete for crumbs to invest in. (Axios)

FinTech | Cryptocurrency company Coinbase posts a record Q1 revenue. (Axios)

Housing | If you sell a house these days, the buyer might be a pension fund. (WSJ)


Renato founded Physik Invest after going through years of self-education, strategy development, and trial-and-error. His work reporting in the finance and technology space, interviewing leaders such as John Chambers, founder, and CEO, JC2 Ventures, Kevin O’Leary, businessman and Shark Tank host, Catherine Wood, CEO and CIO, ARK Invest, among others, afforded him the perspective and know-how very few come by.

Having worked in engineering and majored in economics, Renato is very detailed and analytical. His approach to the markets isn’t built on hope or guessing. Instead, he leverages the unique dynamics of time and volatility to efficiently act on opportunity.


At this time, Physik Invest does not manage outside capital and is not licensed. In no way should the materials herein be construed as advice. Derivatives carry a substantial risk of loss. All content is for informational purposes only.

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