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Commentary

Market Commentary For 12/18/2020

What Happened: U.S. index futures accepted new highs, balancing just above Thursday’s regular trading activity.

What Does It Mean: During Thursday’s regular trade, the S&P 500 confirmed higher prices, with the auction separating and establishing value above prior range.

Overnight, the S&P 500 index future found responsive buyers at the $3,699.75 high-volume area, a valuable price, and initiated up to the $3,720.00 price extension. As of now, ahead of Friday’s derivative expiry, futures have backed off their highs, balancing.

What To Expect: In light of the small overnight gap, the following frameworks apply for today’s trade.

In the best case, buyers maintain conviction and hold the index above the $3,699.75 high-volume node. Holding said reference, and trading into the excess above $3,723.00, would constitute a balance-area breakout. Given the derivative expiry, the odds of sustained directional resolve, today, are low.

In the worst case, if the S&P 500 is brought back into range, participants can expect further balancing. In other words, we’re looking for higher prices, at or above $3,700.00, to facilitate increased trade. A thickening of the composite profile, at the highs, would denote acceptance.

Adding, with any breakout from balance, separation of value is key; such activity would be recognized by range expansion above the aforementioned excess high. A penetration of the $3,699.75 high-volume node, lower, suggests the market is not ready for further upside; less aggressive, responsive trade is the course of action.

Levels Of Interest:  The $3,699.75 high-volume node, as well as the excess above $3,723.00.

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Commentary

Market Commentary For 12/17/2020

What Happened: After yesterday’s Federal Reserve policy decision, U.S. index futures auctioned higher overnight alongside hopes of added U.S. fiscal and monetary stimulus, as well as vaccine rollouts.

What Does It Mean: During Wednesday’s regular trade, the S&P 500 initiated up to the $3,691.25 high-volume node, a valuable price, before sellers responded, established excess, and extended lower into the close.

Given the response to yesterday’s Federal Reserve decision, as well as overnight activity, the S&P 500 remains in a tactically bullish position, confirming the higher-time frame upside breakout which targets prices as high as $4,000.

What To Expect: In light of the overnight gap higher, the following frameworks apply for today’s trade.

In the best case, buyers maintain conviction and hold the index above the $3,691.25 high-volume node. Thereafter, upside references include the high-volume node near $3,710.00, and then the $3,720.00 price extension.

In the worst case, if the S&P 500 is brought back into range, participants can expect further balancing. The current market environment supports the long-gamma narrative in which volatility is suppressed and the market pins or slowly rises in a range-bound fashion.

Adding, the market has initiated back through $3,680.00, a low-volume area. Such low-volume areas denote directional conviction and ought to offer support on any test. Penetrating the low-volume area would put in play the $3,667.75 high-volume node.

Levels Of Interest:  $3,680.00 low-volume node, the $3,710.00 and $3,667.75 high-volume nodes, as well as the $3,720.00 price extension.

Bonus: Opportunities unfolding.

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Commentary

Market Commentary For 12/16/2020

What Happened: Ahead of today’s Federal Reserve policy decision, U.S. index futures auctioned higher overnight.

What Does It Mean: During Tuesday’s regular trade, the S&P 500 initiated up to the $3,667.75 high-volume node, a valuable price, before sellers responded, extended lower, and then buyers retook control, one time framing higher into the close.

Given that Monday’s selling activity was negated yesterday, the S&P 500 sits in a tactically bullish position, confirming the higher-time frame upside breakout which targets prices as high as $4,000.

Pictured: Daily candlestick chart of the cash S&P 500 Index

Adding, the overnight auction brought the index back above its most valuable price over the past two weeks of trade, the most positive outcome.

What To Expect: In light of the overnight gap higher, the following frameworks apply for today’s trade.

In the best case, buyers maintain conviction through the Federal Reserve event, and hold the index above the $3,667.75 high-volume node. Thereafter, upside references include the high-volume node at $3,707.75, and then the prior all-time rally high.

In the worst case, if the S&P 500 is brought back below $3,667.75, participants would look to whether the auction — again — resists last Friday’s range. As stated yesterday, accepting Friday’s range puts in play the minimal excess lows near $3,625.00. Any activity below $3,625.00 would put in question the higher-time frame breakout.

Levels Of Interest:  $3,667.75 high-volume node is the go/no-go level today.

Key Takeaways: In the face of volatile positioning, and the S&P 500’s balancing activity, the macro- and technical-landscape remains bullish.

In support of a rally is the (1) return of systematic strategies, (2) seasonality, and (3) a weaker dollar, among other factors.

Still, the Fed decision and rebalancing are around the corner, while sentiment and other positioning metrics are at extremes. It’s a time to get picky with trades.

Bonus: Here is a look at a few of the opportunities unfolding.

Chipotle Mexican Grill Inc (NYSE: CMG) – Potential for upside breakout and continuation. Upgraded on Wednesday.

Shopify Inc (NYSE: SHOP) – Balance just shy of channel boundary. Potential for upside breakout and continuation.

Apple Inc (NASDAQ: AAPL) – Acceptance after higher-time frame balance-breakout.

Advanced Micro Devices Inc (NASDAQ: AMD) – Acceptance after higher-time frame balance-breakout.

Spotify Technology SA (NYSE: SPOT) – Acceptance after higher-time frame balance-breakout. Potential remains for a push to the balance-area projection.

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Commentary

Market Commentary For 12/15/2020

What Happened: After a day emotional selling, dominated by short-term market participants, U.S. index futures auctioned higher overnight alongside news of COVID-19 relief measures.

What Does It Mean: During Monday’s trade, the S&P 500 initiated up to the $3,690.75 high-volume node, a valuable price, before sellers responded and extended range.

Later, as the auction traversed prior poor structures (i.e., low-volume areas), selling intensified — via a spike lower — and the session ended at extremes.

The overnight auction, however, negated the late-day selling, bringing the S&P 500 back to its most valuable price over the past two weeks of trade.

What To Expect: In light of the overnight gap higher, the following frameworks apply for today’s trade.

In the best case, buyers maintain conviction and initiate through the $3,667.75 high-volume node before continuing to at least the next high-volume node at $3,690.75, and then the prior all-time rally high.

In the worst case, if the S&P 500 remains below $3,667.75, participants would look to whether the auction — again — resists Friday’s range. Accepting Friday’s range puts in play the minimal excess lows near $3,625.00. Auctioning below $3,625.00 would put in question the higher-time frame breakout.

Levels Of Interest:  $3,667.75 high-volume node is the go/no-go level today.

Bonus: Please see the below chart for context on the higher-time frame S&P 500 breakout.

Pictured: Daily candlestick chart of the cash S&P 500 Index
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Commentary

Market Commentary For 12/14/2020

What Happened: Alongside optimism surrounding the COVID-19 coronavirus vaccine and stimulus talks, U.S. index futures auctioned higher overnight.

What Does It Mean: During last week’s trade, U.S. index futures auctioned to new all-time highs, before moving back into balance.

For the remainder of the week, participants accepted lower prices until Friday’s session established minimal excess lows, broke into prior poor structure, and ended the technical downtrend. 

Since Friday’s session found responsive buying surface at a key technical level (i.e., the high-volume node near $3,630.00 and 20-day simple moving average), buyers extended range through the $3,667.75 high-volume node, the most positive outcome.

What To Expect: In light of the overnight gap higher, the following frameworks apply for today’s trade.

In the best case, the auction makes an attempt to repair some of the poor overnight structure. Thereafter, buyers regain conviction and initiate back through the $3,667.75 high-volume node before continuing to at least the next high-volume node at $3,690.75, and then the prior all-time rally high.

In the worst case, if the S&P 500 auctions below $3,667.75, participants would look to whether the S&P 500 resists Friday’s range. Accepting Friday’s range (i.e., spending more than one half-hour period) may put in play the minimal excess lows near $3,625.00.

Levels Of Interest:  $3,667.75 high-volume node is the go/no-go level.

Bonus: Opportunities unfolding.

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Commentary

‘To Infinity And Beyond’: Market Commentary For The Week Ahead

Key Takeaways:

What Happened: During last week’s trade, U.S. index futures auctioned to new all-time highs, before moving back into balance.

What Does It Mean: After participants established an all-time rally high during Wednesday’s overnight session, the S&P 500 liquidated in regular trading, down to the micro-composite high-volume node near $3,667.75, a price level where participants spent a large amount of time in the past. The session ended in prior balance and range with poor profile structure denoting the presence of directional conviction.

For the remainder of the week, participants accepted lower prices until Friday’s session established minimal excess lows, broke into prior poor structure, and ended the technical downtrend. 

Given the mechanical trade (i.e., minimal excess at Friday’s lows) and poor structure (e.g., low-volume areas), it’s very likely that the selling range extension was the result of weak-handed, short-term momentum buyers liquidating positions in panic.

Pictured: Profile overlays on a 65-minute candlestick chart of the Micro E-mini S&P 500 Futures

What To Expect: Friday’s session found responsive buyers surface at a key technical level (i.e., the high-volume node near $3,630.00 and 20-day simple moving average). The fact that there was a response at a technical reference confirms that participation in the market is overwhelmingly short-term; in other words, institutions (e.g, funds) tend not to transact at exact technical levels. 

Given that the higher-time frame breakout remains intact, participants will come into Monday’s session knowing the following:

  1. Both sentiment and positioning are historically stretched while the market has entered a short-gamma environment; in such cases, dealers hedge their derivatives exposure by buying into strength and selling into weakness. This, alongside the presence of short-term traders in U.S. equities, will exacerbate volatility in the coming week.
  2. Looking to 2021, the decline in realized correlation due to factor and sector rotation, as well as the return of systematic option selling strategies should push the long-gamma narrative in which volatility is suppressed and the market pins or slowly rises in a range-bound fashion.
  3. JPMorgan Chase & Co. (NYSE: JPM) strategist Marko Kolanovic suggests equities will rally short-term with the S&P 500 auctioning as high as $4,000 on the basis of low rates, improved fundamentals, buybacks, as well as systematic and hedge fund strategies.
  4. Despite high CAPE ratios, stock-market valuations aren’t that absurd.
  5. Prior trade points to the non-presence of committed selling; after Friday’s session saw a failure to range extend and establish excess, the technical down-trend was broken.

Therefore, the following frameworks for next week’s trade apply.

In the best case, buyers surface at the $3,654.75 low-volume node and extend range up to the high-volume node at $3,667.75. High-volume areas denote value and should slow prices allowing participants enough time to enter and exit trades. An initiative drive through this area would portend a test of the $3,690.75 high-volume node, and then the prior all-time rally high.

In the worst case, if the S&P 500 auctions below $3,630.00, participants would look to repair the poor structure just shy of $3,625.00. Finding acceptance (i.e., spending more than one half-hour of regular trade) below Friday’s range would be the most negative outcome.

Conclusion: Though sentiment and positioning imply limited potential for further upside, the S&P 500’s higher-time frame breakout remains intact.

Pictured: Retest of the upside breakpoint on a daily candlestick chart of the cash S&P 500 Index

Levels Of Interest: $3,720.00 extension, $3,715.00 all-time rally high, the micro-composite HVNode at $3,690.75, $3,667.75, and $3,630.00, as well as the $3,654.75 LVNode and poor structure near $3,625.00.

Bonus: Here is a look at some of the opportunities unfolding.

Spotify Technology SA (NYSE: SPOT) – Acceptance after higher-time frame balance-breakout. Potential remains for a push to the balance-area projection.

Apple Inc (NASDAQ: AAPL) – Acceptance after higher-time frame balance-breakout. Potential scenarios include (1) continued rotation, (2) upside continuation, or (3) failed breakout and a return to balance.

Advanced Micro Devices Inc (NASDAQ: AMD) – Acceptance after higher-time frame balance-breakout. Potential for upside continuation or failed breakout and return to balance.

Shopify Inc (NYSE: SHOP) – Balance just shy of channel boundary. Potential for upside breakout and continuation.

Chipotle Mexican Grill Inc (NYSE: CMG) – Just shy of balance-area high. Potential for upside breakout and continuation.

Tesla Inc (NASDAQ: TSLA) – Rejected prior week’s balance-area. Likelihood of continuation up to S&P 500 index inclusion intact on surging call volumes, dealer accumulation. $700 strike is the high-OI strike of interest.

Zoom Video Communications Inc (NASDAQ: ZM) – Just shy of long-term trend, anchored VWAP. Potential for responsive buying.

Summit Materials Inc (NYSE: SUM) – Failed breakout, but speculative call volumes surfaced on the return into balance. Potential exists for another attempt higher.

Nasdaq-100 (INDEXNASDAQ: NDX) – Retest of balance-area high. Higher time-frame breakout remains intact.

Cover photo by SpaceX from Pexels.

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Commentary

Market Commentary For 12/11/2020

What Happened: Alongside worries over the economic impact of a resurgent pandemic, U.S. index futures auctioned lower overnight.

What Does It Mean: During Thursday’s regular trading, buyers responded to lower prices, at the high-volume node near $3,667.75, a price level where the auction spent a lot of time in the past.

The session ended inside of prior balance and range denoting acceptance of the lower prices.

What To Expect: In light of yesterday’s price acceptance and the overnight gap lower, the following frameworks apply for today’s trade.

In the best case, the auction makes an attempt to repair some of the poor overnight structure. Thereafter, buyers regain conviction and initiate through the $3,642.75 balance-area boundary, ending the downtrend. This scenarios would put in play the high-volume node at $3,667.75.

In the worst case, if the S&P 500 auctions below $3,630.00, participants would look to whether the $3,592.25 balance-boundary offers a response. If not, the higher-time frame breakout is put into question.

Levels Of Interest:  $3,642.75 and $3,592.25 balance-area boundary, as well as the $3,667.75 and $3,630.00 high-volume nodes.

Bonus: The higher-time frame breakout remains intact and selling appears measured. Still, the rally is on hold; monitor for continuation.

Pictured: Daily candlestick chart of the cash S&P 500 Index

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Commentary

Market Commentary For 12/10/2020

What Happened: U.S. index futures were flat overnight after a trend-day lower from fresh new all-time highs.

What Does It Mean: During Wednesday’s regular trading, sellers extended range down to the micro-composite high-volume node near $3,667.75, a price level where participants spent a large amount of time in the past. The session ended outside of prior balance and range with poor profile structure denoting the presence of directional conviction.

Overnight, participants accepted the lower prices, holding near Wednesday’s low.

What To Expect: In light of yesterday’s selling, the following frameworks apply for today’s trade.

In the best case, responsive participants surface at the $3,667.75 high-volume node and buyers make an attempt to repair some of Wednesday’s poor structure.

In the worst case, if the S&P 500 auctions below $3,667.75, participants would look to whether the $3,640.00 balance-boundary and offers a response. If not, initiative buying has been exhausted — the chances of sustained upside directional resolve are diminished greatly.

Levels Of Interest:  $3,667.75 high-volume node and $3,640.00 balance-boundary.

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Commentary

Market Commentary For 12/9/2020

What Happened: U.S. index futures rose higher overnight, bolstered by stimulus and vaccine news. The S&P 500 is now coming off a fresh new all-time high at the site of multiple price projections.

What Does It Mean: During Tuesday’s regular trading in the S&P 500, initiative buyers extended range after a test of the micro-composite high-volume node near $3,667.75, a price level where participants spent a large amount of time in the past. The session ended outside of prior balance and range with poor profile structure denoting the presence of directional conviction.

Overnight, participants accepted higher prices, holding Tuesday’s all-time, day-session rally-high.

What To Expect: In light of yesterday’s price exploration, the following frameworks apply for today’s trade.

In the best case, if participants manage to further spend time and build value above the $3,690.75 high-volume node, then initiative buyers remain in control — the nearest upside level of interest is the high-volume node near $3,710.00 and price extension at $3,720.50.

In the worst case, auctioning below the $3,690.75 high-volume node would denote a change in conviction. As a result participants would then look to whether the $3,682.00 balance boundary offers any response. Breaking that figure denotes a rotational market — one that needs to digest this recent leg up.

Levels Of Interest:  $3,690.75 and $3,710.00 high-volume nodes, $3,720.00 price extension.

Bonus: Here is a look at some of the opportunities unfolding.

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Commentary

Market Commentary For 12/8/2020

What Happened: Alongside concerns over the resurgence of COVID-19, U.S. index futures extended lower, with the S&P 500 auctioning into a composite high-volume node, the market’s most recent perception of value.

What Does It Mean: During Monday’s regular trading in the S&P 500, initiative buyers failed to extend range; the session ended in prior balance and range with minimal excess denoting the non-presence of conviction.

Overnight, participants auctioned back below the $3,682.00 balance-area boundary, before responsive buying surfaced near the $3,667.75 high-volume node. Given that the S&P 500 is trading within last week’s balance area, the potential exists for a failed break.

What To Expect: In light of the re-entry into balance, the following frameworks will apply for today’s trade.

In the best case, if participants manage to further spend time and build value above the $3,682.00 balance boundary, then initiative buyers remain in control — the nearest upside level of interest is the projection near $3,710.00.

In the worst case, auctioning further below the $3,667.75 high-volume node would denote a clear change in conviction. As a result participants would look to whether the $3,640.00 balance boundary holds. Breaking that reference puts the rally on hold.

Levels Of Interest:  $3,682.00 balance-area boundary.