Categories
Commentary

Daily Brief For August 11, 2021

Market Commentary

Equity index futures are sideways and divergent.

  • Senate passes new $3.5T economic blueprint.
  • Ahead: Data on CPI, Federal Budget Balance.
  • Sideways chop as participants position for CPI.

What Happened: U.S. stock index futures auctioned sideways ahead of data that would provide clarity on the direction of consumer prices.

According to Moody’s: “The CPI rose 0.9% in June, but it likely moderated in July, since we don’t expect used car prices to have risen as quickly as they have recently. Elsewhere on the inflation front, we will get data on producer and import prices. After the release of the CPI and PPI, we will have a good idea of what the core PCE deflator, the Fed’s preferred measure of inflation, did in June.”

Ahead is also data on the Federal Budget Balance and Fed speak.

Graphic updated 6:45 AM ET. Sentiment Neutral if expected /ES open is inside of the prior day’s range. See here for more on the Dark Pool Index and Gamma. A positive Dark Pool Index reading is bullish. At the same time, the higher (lower) the gamma, the less (more) volatility. SHIFT Search data used for options activity. Note that options flow is sorted by the call premium spent; if green and more (less) positive then more (less) was spent on call options. Breadth reflects a reading of the prior day’s Advance/Decline indicator. VIX reflects a reading of the CBOE Volatility Index from 0-100.

What To Expect: As of 6:45 AM ET, 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 best case outcome occurred, evidenced by initiative trade above the $4,422.75, a prior balance area high (BAH), up to the $4,438.50 Fibonacci extension. 

Initiative Buying (Selling): Buying (selling) within or above (below) the previous day’s value area.

Balance (Two-Timeframe Or Bracket): Rotational trade that denotes current prices offer favorable entry and exit. Balance-areas make it easy to spot a change in the market (i.e., the transition from two-time frame trade, or balance, to one-time frame trade, or trend). 

This advance happened in spite of top-line divergences, as well as lackluster metrics with respect to market liquidity and breadth.

Unlike on the NYSE side of things (which sported positive breadth with an inflow into stocks that were up versus down), internals on the Nasdaq were markedly weak with negative breadth supporting a liquidation in the Nasdaq 100 (INDEX: NDX). 

In terms of market liquidity, the cumulative volume delta – a measure of buying and selling power as calculated by the difference in volume traded at the bid and offer – revealed no actionable divergences.

Coming into today’s Consumer Price Index (CPI) release, participants will notice the S&P 500, in particular, trading within a 3-day balance area, above a prior 10-day balance area. In short, since last week’s breakout, little has changed. What was thought would happen (i.e., expansion of range) didn’t happen.

Instead, trade was volatile, establishing excess just a tick short of the $4,438.50 Fibonacci extension as participants likely worked to position themselves for the mid-week data dump. As a result, until after the first couple of impulses on the CPI release, participants are cautioned on early trade.

Excess: A proper end to price discovery; the market travels too far while advertising prices. Responsive, other-timeframe (OTF) participants aggressively enter the market, leaving tails or gaps which denote unfair prices.

Moreover, for today, participants can trade from the following frameworks. 

In the best case, the S&P 500 trades sideways or higher; activity above the $4,422.75 BAH likely puts in play the $4,433.00 untested point of control (VPOC). Initiative trade beyond the VPOC could reach as high as the $4,438.25 regular trade high (RTH High) and $4,446.25 Fibonacci extension.

In the worst case, the S&P 500 trades lower; activity below the $4,422.75 BAH likely puts in play the $4,415.75 low volume area (LVNode). Initiative trade beyond the LVNode could reach as low as the $4,411.00 VPOC and $4,406.25 LVNode.

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.

Significance Of Prior ATHs, ATLs: Prices often encounter resistance (support) at prior highs (lows) due to the supply (demand) of old business. These areas take time to resolve. Breaking and establishing value (i.e., trading more than 30-minutes beyond this level) portends continuation.

POCs: POCs 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.
Graphic: 65-minute profile chart of the Micro E-mini S&P 500 Futures. Graphic updated 6:45 AM ET.

News And Analysis

Earnings historically strong and policy transition.

Hackers steal $600M in likely largest DeFi theft.

Economic activity restart is real and broadening.

A turning point for markets meriting a hard look.

Biden administration to urge OPEC output boost.

The Senate passed a $550B infrastructure plan.

Delta forces hospitals to ration scarce ICU beds.

Mortgage applications rise with rates below 3%.

A systemic cyberattack presents risks for banks.

What People Are Saying

About

After years of self-education, strategy development, and trial-and-error, Renato Leonard Capelj began trading full-time and founded Physik Invest to detail his methods, research, and performance in the markets. 

Additionally, Capelj is a finance and technology reporter. Some of his biggest works include interviews with 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.

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.

Categories
Commentary

Daily Brief For August 10, 2021

Market Commentary

Equity index futures are sideways and divergent.

  • Taper talk, COVID-19 fears, infrastructure news.
  • Ahead: NFIB, productivity, unit labor, Fed speak.

What Happened: U.S. stock index futures auctioned sideways alongside COVID-19 fears, infrastructure, crypto regulation, and taper talk.

This comes as core inflation is expected to come in around 4.8%, “likely unhinging Powell and expediting the talk about talking about tapering as early as in September,” according to Nordea.

Ahead is data on the NFIB small-business index, productivity, unit labor costs, and earnings. Cleveland Fed President Loretta Mester speaks at 10:00 AM ET.

Graphic updated 6:30 AM ET. Sentiment Neutral if expected /ES open is inside of the prior day’s range. See here for more on the Dark Pool Index and Gamma. A positive Dark Pool Index reading is bullish. At the same time, the higher (lower) the gamma, the less (more) volatility. SHIFT Search data used for options activity. Note that options flow is sorted by the call premium spent; if green and more (less) positive then more (less) was spent on call options. Breadth reflects a reading of the prior day’s Advance/Decline indicator. VIX reflects a reading of the CBOE Volatility Index from 0-100.

What To Expect: As of 6:30 AM ET, Tuesday’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 best case outcome occurred, evidenced by sideways trade at the $4,422.75 balance area high (BAH). This is significant because the BAH marked a shift in tone (i.e., a transition from two-time frame trade, or balance, to one-time frame trade, or trend).

Given that the BAH was not lost, the default balance break scenarios remain in play (i.e., play the break rather than fade the edges). As a result, we monitor for rejection (i.e., a return inside of balance). This would portend a move to the opposite end of balance, or the $4,365.25 low volume area (LVNode) in the S&P 500 future.

Graphic: 65-minute candlestick charts of the cash-settled S&P 500 (INDEX: SPX), Nasdaq 100 (INDEX: NDX), Russell 2000 (INDEX: RUT), and Dow Jones Industrial Average (INDEX: DJI). The S&P 500, of the four index products covered, has yet to invalidate its breakout.

To note, briefly, yesterday’s rangebound trade came alongside divergences with respect to price, market liquidity, and market internals. 

For instance, breadth at the exchange level was negative with a minuscule inflow into stocks that were down, versus those that were up. The cumulative volume delta – a measure of buying and selling power as calculated by the difference in volume traded at the bid and offer – diverged from mid-afternoon prices inspiring confidence in responsive trade. 

Responsive Buying (Selling): Buying (selling) in response to prices below (above) an area of recent price acceptance.

Moreover, for today, participants can trade from the following frameworks. 

In the best case, the S&P 500 trades sideways or higher; activity above the $4,422.75 BAH puts in play the $4,429.25 high volume area (HVNode). Initiative trade beyond the HVNode could reach as high as the $4,433.25 regular trade high (RTH High) and $4,438.50 Fibonacci extension.

In the worst case, the S&P 500 trades lower; activity below the $4,422.75 BAH puts in play the $4,415.76 LVNode. Initiative trade beyond the LVNode could reach as low as the $4,411.00 untested point of control (VPOC) and $4,406.25 LVNode.

Initiative Buying (Selling): Buying (selling) within or above (below) the previous day’s value area.

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 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.

Significance Of Prior ATHs, ATLs: Prices often encounter resistance (support) at prior highs (lows) due to the supply (demand) of old business. These areas take time to resolve. Breaking and establishing value (i.e., trading more than 30-minutes beyond this level) portends continuation.
Graphic: 65-minute profile chart of the Micro E-mini S&P 500 Futures. Graphic updated 6:20 AM ET.

News And Analysis

China’s top oil refiner said to cut run as delta hits.

Biden’s agenda teed up for Senate endorsement.

SoftBank cut China investments until more clarity.

Major shocks see a divergence in rating migration.

The fully vaccinated are still catching COVID-19.

Analysts are warning on buy now, pay later trend.

What People Are Saying

About

After years of self-education, strategy development, and trial-and-error, Renato Leonard Capelj began trading full-time and founded Physik Invest to detail his methods, research, and performance in the markets. 

Additionally, Capelj is a finance and technology reporter. Some of his biggest works include interviews with 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.

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.

Categories
Commentary

Daily Brief For July 26, 2021

Market Commentary

Equity index futures trade sideways to lower. Yields lead lower.

  • China tension, infrastructure, COVID talk.
  • Ahead are new home sales and earnings.
  • S&P plays with a potential auction failure.

What Happened: U.S. stock index futures auctioned sideways to lower overnight alongside narratives surrounding a U.S. and China stalemate, progress on infrastructure, as well as the spread of COVID-19 variants.

On COVID-19, Nordea analysts conclude: “Delta is a cause for concern around the globe, but judging from the case to hospitalization ratio, it seems as if the crisis is already mostly over. Central banks will conclude the same soon, even if the initial reaction to Delta is clearly dovish.”

Moreover, ahead is data on new home sales, as well as earnings reports by Tesla Inc (NASDAQ: TSLA) and Lockheed Martin Corporation (NYSE: LMT), among other companies.

Graphic updated 6:40 AM ET. Sentiment Neutral if expected /ES open is inside of the prior day’s range. See here for more on the Dark Pool Index and Gamma. A positive Dark Pool Index reading is bullish. At the same time, the higher (lower) the gamma, the less (more) volatility. SHIFT Search data used for options activity. Note that options flow is sorted by the call premium spent; if green and more (less) positive then more (less) was spent on call options. Breadth reflects a reading of the prior day’s Advance/Decline indicator.

What To Expect: As of 6:40 AM ET, Monday’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 Friday’s trade, the best case outcome occurred, evidenced by trade above $4,384.50, a prior all-time high (ATH) and balance-area high (BAH).

Balance (Two-Timeframe Or Bracket): Rotational trade in which current prices offer favorable entry and exit. Balance-areas make it easy to spot a change in the market (i.e., the transition from two-time frame trade, or balance, to one-time frame trade, or trend).

To note, Friday’s trade happened on positive, albeit weaker breadth. This is in comparison to Thursday’s session during which breadth, measured by the Advance/Decline indicator, was negative and not supportive of an advance in price.

A key thing to watch for is acceptance (i.e., more than 1-hour of trade) and whether an auction failure transpires.

If initiative buyers were to further expand the range, then all is well. However, in a failure to move higher, confirmed by trade below Friday’s $4,372.50 regular trade low (RTH Low), an auction failure may foreshadow a liquidation break.

Liquidation Breaks: A profile shape that suggests participants were “too” long and had poor location.

For today, participants can trade from the following frameworks. 

In the best case, the S&P 500 trades sideways or higher; activity above the $4,384.50 pivot puts in play the $4,398.50 high volume area (HVNode). Initiative trade beyond the $4,398.50 HVNode could reach as high as the $4,407.75 ATH and $4,428.25 Fibonacci-derived target.

In the worst case, the S&P 500 trades lower; activity below the $4,384.50 pivot puts in play a potential auction failure confirmed by trade below the $4,372.50 RTH Low. Initiative trade beyond the RTH Low may reach as low as the $4,353.00 untested Point of Control (VPOC) and $4,325.75 LVNode.

To note, the last key level corresponds with two anchored Volume Weighted Average Price (VWAP) levels, 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.

POCs: POCs 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.

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.
Graphic: 65-minute profile chart of the Micro E-mini S&P 500 Futures. Graphic updated 6:30 AM ET.

News And Analysis

China stocks tumble in panic selling amid a broad crackdown.

U.S. infrastructure talks near finish as Senators face pressure.

U.S. real yields fell to a record low alongside growth concerns.

The COVID-19 coronavirus crisis is officially over (in the West).

U.S. home price appreciation to moderate as supply increases.

What People Are Saying

About

After years of self-education, strategy development, and trial-and-error, Renato Leonard Capelj began trading full-time and founded Physik Invest to detail his methods, research, and performance in the markets. Additionally, Capelj is a finance and technology reporter. Some of his biggest works include interviews with 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.

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.