Categories
Commentary

Daily Brief For May 19, 2021

Daily commentary for U.S. broad market indices.

Market Commentary

Index futures in price discovery.

  • Light calendar – Fed speak, minutes.
  • Indices lower. Potential for response.

What Happened: U.S. stock index futures auctioned lower, overnight, alongside fears of inflation and a COVID-19 resurgence in some parts of the world.

Today’s calendar is rather light. Of interest is Fed-speak, ahead of the publication of April minutes.

Graphic updated 7:05 AM EST.

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

Adding, during the prior day’s regular trade, after failing at the $4,177.25 developing ledge, the worst-case outcome occurred, evidenced by initiative trade below the $4,129.25 high volume area (HVNode), on an end-of-day spike.

Ledges: Flattened area on the profile which suggests responsive participants are in control, or initiative participants lack the confidence to continue the discovery process. The ledge will either hold and force participants to liquidate (cover) their positions, or crack and offer support (resistance).

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.

Spikes: Spike’s mark the beginning of a break from value. Spikes higher (lower) are validated by trade at or above (below) the spike base (i.e., the origin of the spike).

For today, participants can trade from the following frameworks. 

In the best case, the S&P 500 trades sideways or higher; activity above the $4,069.25 HVNode has the potential to trade up into the $4,122.25 HVNode. Initiative trade beyond the $4,122.25 HVNode could reach as high as the $4,134.00 spike base, a major pivot (i.e., above = bullish, below = neutral-to-bearish) for today’s trade.

In the worst case, the S&P 500 trades lower; activity below the $4,069.25 HVNode targets the LVNode boundary at $4,050.75. Auctioning past that boundary puts in play the poor structure at $4,015.00 and $4,001.00. Ultimately, in case of lower prices, participants would look for responsive buying to appear at and below the $3,970.75 price projection.

Graphic: 4-hour profile chart of the Micro E-mini S&P 500 Futures.
Graphic: SHIFT search suggests participants were most interested in longer-dated put strikes at and below current prices in the cash-settled S&P 500 Index (INDEX: SPX) and Nasdaq 100 Index (INDEX: NDX), May 18.

News And Analysis

Markets | Bitcoin plunges to $38,000 as Elon Musk-fueled rally collapses. (BBG)

Markets | The U.S. dollar is not crashing no matter what the banks say. (BBG)

Recovery | Fully vaccinated people could need a yearly COVID booster shot. (CNBC)

Economy | Yellen pushes higher taxes, stronger unions to the U.S. chamber. (CNBC)

Economy | U.K. inflation more than doubles as post-lockdown climb begins. (REU)

Economy | Biden tax proposal will most likely have a limited effect on ratings. (S&P)

Economy | European Union plans to open borders to vaccinated travelers. (Axios)

Energy | U.S. shale firms are limiting their outputs despite rising prices. (BBG)

Markets | High yield default rate is at its lowest rate since October 2019. (Forbes)

Economy | Construction starts pulled back in April due to supply problems. (MND)

What People Are Saying

Innovation And Emerging Trends

Markets | Biggest risk in markets has shifted; concerns over Fed inaction. (BBG)

FinTech | Global trading platform Stake adds $30M from Tiger, DST Global. (BZ)

FinTech | Secfi secures investment for its stock option financing platform. (BZ)

Energy | Paper company wants to make a wooden rival to car batteries. (BBG)

Trading | Fidelity’s pitch to America’s teens: no-fee brokerage accounts. (WSJ)

About

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.

Disclaimer

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.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s