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Commentary

Daily Brief For April 13, 2021

Market Commentary

Index futures are attempting to balance and validate higher prices.

  • U.S. calls for pause to one vaccine.
  • Participants await data on inflation.
  • Futures off new highs, but in-range.

What Happened: U.S. stock index futures auctioned higher overnight before liquidating alongside calls to stop using the Johnson & Johnson (NYSE: JNJ) vaccine after clotting cases.

What To Expect: Tuesday’s regular session (9:30 AM – 4:00 PM EST) will likely open inside of prior-range and -value, suggesting a low potential for immediate directional opportunity.

Adding, during the prior day’s regular trade, the best case outcome occurred, evidenced by range-bound trade above the $4,104.00 spike base, which is significant because it validated Friday’s late-day knee-jerk rally away from value, or the fairest price to do business for that session.

Coming up, consumer-price index numbers will be released at 8:30 a.m. EST; participants increasingly see the risks of inflation and taxes as a big headwind

As an aside, as noted in the Weekly Brief, Friday, April 16, will mark an end to the monthly options expiration. As that date approaches, and volatility continues to drop, given how participants are positioned, odds of sustained directional resolve are low.

For today, participants can trade from the following frameworks. 

In the best case, the S&P 500 trades sideways or higher; activity above the $4,104.00 spike base targets $4,117.25, the 50% overnight retracement. Initiative trade beyond the 50% retracement could reach as high as the $4,127.00 ONH. In the worst case, the S&P 500 trades lower; activity below $4,104.00 puts the rally on hold and targets the $4,069.00 and $3,943.00 high-volume areas (HVNodes).

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

More On Volume Areas: A structurally sound market will build on past areas of high-volume (HVNode). Should the market trend for long periods of time, it will lack sound structure (identified as a low-volume area (LVNode) 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.
Graphic: 4-hour profile chart of the Micro E-mini S&P 500 Futures.
Graphic: Physik Invest maps out the purchase of call and put options in the SPDR S&P 500 ETF Trust (NYSE: SPY), for April 12. Activity in the options market was primarily concentrated in short-dated tenors, in strikes as low as $398, which corresponds with $3,980 in the cash-settled S&P 500 Index (INDEX: SPX).
Graphic: SHIFT search shows that trade in the cash-settled S&P 500 Index (INDEX: SPX) was concentrated in put strikes below current prices. 

News And Analysis

Technology | Nvidia challenges Intel with Arm-based ‘Grace’ server chip. (REU)

Markets | Large U.S. Treasury auctions could restart the rise in yields. (REU)

Markets | Bank returns to rebound dramatically amid reserve releases. (S&P)

Markets | U.S. put off derivatives rule for a decade before Archegos failure. (FT)

Markets | Extreme contango in Bitcoin futures curve is raising eyebrows. (BBG)

Markets | The SEC announced a review of the WisdomTree Bitcoin ETF. (CD)

Markets | Yellen plans to spare China from a currency manipulator label. (BBG)

Recovery | COVID strain that emerged in U.K. not as deadly as feared. (BBG)

Economy | Simple mathematics is about to cause an inflation problem. (BBG)

What People Are Saying

Innovation And Emerging Trends

FinTech | Coinbase’s direct listing to drive a wave of crypto innovation. (CB)

FinTech | Binance launches tokenized stock trading, starting with Tesla. (TB)

FinTech | State Street allows use of platform for cryptocurrency trading. (BD)

Banking | Crypto shadow banking explained and why yields are so high. (BBG)

FinTech | Machine learning futures algo trading surges at JPMorgan. (TT)

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, Canadian 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.