Categories
Commentary

Daily Brief For June 2, 2021

Daily commentary for U.S. broad market indices.

Market Commentary

Index futures in balance.

  • Traders position for upcoming catalysts.
  • Ahead: ECB report, auto sales, Fed talk.
  • Stock indices trading sideways to higher.

What Happened: U.S. stock index futures auctioned sideways overnight.

This came after the S&P 500, Nasdaq 100, and Dow Jones Industrial Average liquidated shortly after yesterday’s cash open. The Russell 2000, unlike its peers, held the top end of its range, signaling the potential of a rotation that could further broaden the bull market.

Not much is happening in terms of economic data. Friday’s U.S. payroll data will likely provide participants more clarity for a directional move.

Graphic updated 8:40 AM ET.

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

Adding, during the prior day’s regular trade, the worst-case outcome occurred, evidenced by a corrective liquidation that brought the S&P 500 back to valuable prices. 

This activity comes as participants are looking to position themselves for impactful releases like data on U.S. payrolls, which may shed a light on the Federal Reserve’s stimulus schedule.

“Investors would see a surge in payrolls growth as a sign that the Fed is more likely to move,” said Lauren Goodwin, portfolio strategist at New York Life Investments.

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 $4,205.25 point of control (POC) puts in play a micro-composite high volume area (HVNode) at $4,208.25 and low volume area (LVNode) at $4,215.75. Initiative trade beyond the two signposts could reach as high as the $4,224.75 HVNode and $4,238.00 overnight high (ONH). 

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.

POCs: POCs (like HVNodes described above) 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.

Overnight Rally Highs (Lows): Typically, there is a low historical probability associated with overnight rally-highs (lows) ending the upside (downside) discovery process.

In the worst case, the S&P 500 trades lower; activity below the $4,190.75 overnight low (ONL) puts in play the $4,177.25 and $4,153.25 HVNode. On a cross of the $4,153.25 HVNode, the $4,122.25 HVNode and $4,071.00 POC come into play, also.

Graphic: 65-minute 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). The Nasdaq weakened while the Russell 2000 strengthened, yesterday. Rotations can broaden bull markets.
Graphic: Physik Invest maps out the purchase of call and put options in the SPDR S&P 500 ETF Trust (NYSE: SPY), for June 1. Activity in the SPY was primarily concentrated in short-dated calls near the money.
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 (INDX: NDX). Noting a persistent interest in long-dated out-of-the-money Nasdaq calls.

News And Analysis

Markets | Low rates lift expected returns, fortify preference for equities. (BLK)

Security | Meat giant to reopen plants hobbled by a recent cyberattack. (BBG)

Health | So far, there is a low risk of human spread of H10N3 bird flu. (REU)

Economy | Housing boom may be cooling as mortgage demand drops. (CNBC)

Economy | U.S. inflation transitory but could become more persistent. (CNBC)

What People Are Saying

Innovation And Emerging Trends

Markets | Power of Muskonomics – credible strategy or cult personality. (FN)

Markets | Standard Chartered joins crypto rush after HSBC opts out. (BBG)

FinTech | Robinhood added new board members to advance IPO push. (WSJ)

FinTech | Nasdaq looks to amend opening auctions for retail interaction. (MM)

FinTech | The implications of BBVA’s shutdown on bank-fintech mergers. (AB)

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.

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