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Administrative
Morning, team. Still working on a bigger write-up for later this week. Here are some key things to know. Have a good day!
Positioning
After a boost bolstered by systematic-type investors acting on changes in trend and volatility, the market is at a pivot of sorts.
After a test of key areas of confluence, measures of the market’s strength weakened heading into the late-day equity weakness, Monday.
Further, lots of the bullishness of the trend change and falling volatility was spent. The market is in a precarious state heading into Jerome Powell’s testimony, today.
Following Powell’s testimony, ranges likely expand.
On one hand, FOMO-type demand for call options exposures, coupled with CTAs further “raising their equity exposure” on trend signals and lower volatility, may boost markets into a “more combustible” state the Daily Brief for February 17 explained.
On the other hand, in the context of liquidity coming off of the table and the increased competition between equities and fixed income, should Powell disappoint, expansion of implied volatility (IVOL) on demands for protection, alone, could “draw markets lower” into the March 17 options expiration (OpEx), options data and insight provider SpotGamma says. For more on how to trade this precariousness and reduce portfolio downside, see the Daily Brief for March 3.
Technical
As of 5:30 AM ET, Tuesday’s regular session (9:30 AM – 4:00 PM ET), in the S&P 500, is likely to open in the upper part of a positively skewed overnight inventory, inside of the prior day’s range, suggesting a limited potential for immediate directional opportunity.
The S&P 500 pivot for today is $4,059.25.
Key levels to the upside include $4,071.25, $4,082.75, and $4,095.25.
Key levels to the downside include $4,045.25, $4,032.75, and $4,019.00.
Disclaimer: Click here to load the updated key levels via the web-based TradingView platform. New links are produced daily. Quoted levels likely hold barring an exogenous development.
Definitions
Volume Areas: Markets will build on areas of high-volume (HVNodes). Should the market trend for a period of time, this will be identified by a low-volume area (LVNodes). The LVNodes denote directional conviction and ought to offer support on any test.
If participants auction and find acceptance in an area of a prior LVNode, then future discovery ought to be volatile and quick as participants look to the nearest HVNodes for more favorable entry or exit.
POCs: Areas where two-sided trade was most prevalent in a prior day session. Participants will respond to future tests of value as they offer favorable entry and exit.
Volume-Weighted Average Prices (VWAPs): A metric highly regarded by chief investment officers, among other participants, for quality of trade. Additionally, liquidity algorithms are benchmarked and programmed to buy and sell around VWAPs.
About
The author, Renato Leonard Capelj, spends the bulk of his time at Physik Invest, an entity through which he invests and publishes free daily analyses to thousands of subscribers. The analyses offer him and his subscribers a way to stay on the right side of the market.
Separately, Capelj is an accredited journalist with past works including interviews with investor Kevin O’Leary, ARK Invest’s Catherine Wood, FTX’s Sam Bankman-Fried, North Dakota Governor Doug Burgum, Lithuania’s Minister of Economy and Innovation Aušrinė Armonaitė, former Cisco chairman and CEO John Chambers, and persons at the Clinton Global Initiative.
Connect
Direct queries to renato@physikinvest.com. Find Physik Invest on Twitter, LinkedIn, Facebook, and Instagram. Find Capelj on Twitter, LinkedIn, and Instagram. Only follow the verified profiles.
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Disclaimer
Do not construe this newsletter as advice. All content is for informational purposes. Capelj and Physik Invest manage their own capital and will not solicit others for it.
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