Tag: DJI – Dow Jones Industrial Average

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Commentary

Daily Brief For July 1, 2021

Market Commentary

Index futures diverge as the bracketing process continues.

  • OPEC to decide on production today.
  • Ahead: Claims, PMI, ISM, Fed speak.
  • SPX and NDX explored higher prices. 

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

The S&P 500 and Nasdaq 100 discovered higher prices before coming back into the prior range. The Russell 2000 and Dow Jones Industrial Average hugged channel resistances suggesting a break may be imminent.

Fundamentally speaking, the U.S. added more jobs than expected last month. That’s good news ahead of Thursday releases on unemployment claims, June manufacturing PMI, ISM manufacturing, Fed speak, used car sales numbers, OECD corporate tax talk, and some miscellaneous earnings.

Graphic updated 7:50 AM ET.

What To Expect: Thursday’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 to higher trade, above the micro-composite Point of Control (POC) at $4,273.25.

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.

Further, after strong buying by longer time frame participants, short-term traders took over; moves became mechanical, halting at key, visual references. This comes alongside narrowing breadth, tapering volumes ahead of a holiday weekend, as well as fundamental concerns such as the resurgence of COVID-19.

Still, according to some, there is no cause for concern; “The delta variant should not have significant repercussions for the pandemic situation in developed markets (e.g. Europe and North America, which have [made] strong progress in vaccinations) due to the level of population immunity,” said strategists led by chief global markets JPMorgan Chase strategist Marko Kolanovic.

Given that broad outlook, for today, participants can trade from the following frameworks. 

In the best case, the S&P 500 trades sideways or higher; activity above the $4,285.00 POC puts in play the $4,294.75 level. Initiative trade beyond $4,294.75 could reach as high as the minimal excess $4,305.75 overnight high (ONH). 

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.

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 $4,285.00 POC puts in play the HVNodes at $4,273.25, $4,256.75, and $4,239.75. 

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: 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).
Graphic: SHIFT search suggests participants were committing the most capital to call strikes at and below current prices in the cash-settled S&P 500 Index (INDEX: SPX) and Nasdaq 100 (INDEX: NDX), last week. This activity may denote (1) stock replacement, (2) hedges for underlying short positions, or (3) speculation on the upside. Also, there was a meaningful bid in September puts on the S&P 500. This dynamic suggests participants, despite their commitment to higher prices, are hedging against near-term risks, like the Jackson Hole Economic Symposium.

News And Analysis

Markets | Tesla Q2 deliveries could clear 200K, set record. (BBG)

Markets | Congress has voted to overturn True Lender rule. (Moody’s)

Markets | Credit conditions ahead – things are looking good. (S&P)

Economy | Pandemic exacerbates affordable housing stress. (Fitch)

Markets | Ford will curb output at more plants on chip issue. (WSJ)

Markets | EV car sales up as Europe’s climate targets bite. (REU)

Markets | What could higher taxes mean for U.S. equities? (BLK)

Economy | Jobs gain is higher after disappointing months. (BBG)

Markets | Robinhood wants you to buy into its IPO in-app. (WSJ)

Markets | The delta variant poses no risk to stock markets. (MW)

Energy | Saudis, Russia have deal for OPEC+ output hikes. (BBG)

Markets | The spotlight is turning to M&A for fintech SPACs. (S&P)

What People Are Saying

Innovation And Emerging Trends

FinTech | Robinhood to pay $70M in large FINRA penalty. (CNBC)

Energy | Hydropower market report – analysis and forecast. (IEA)

FinTech | Senators mull Fed crypto as China races ahead. (S&P)

FinTech | A vision for decentralized finance built on bitcoin. (BBG)

FinTech | SoftBank gave $200M to Latam crypto exchange. (REU)

Travel | Air taxis coming but not in the way you are thinking. (WSJ)

FinTech | Bank users cement relations with digital channels. (S&P)

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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Categories
Commentary

Daily Brief For June 29, 2021

Market Commentary

Equity index futures diverge, trade sideways.

  • COVID variants cause lockdowns.
  • Ahead are some economic reports.
  • RUT, DJI firming. SPX, NDX weak.

What Happened: U.S. stock index futures auctioned sideways ahead of some key releases. The Russell 2000 and Dow Jones Industrial Average firmed up relative to their peers, the S&P 500 and Nasdaq 100, the group leader.

This activity comes as banks boosted their dividends and uncertainties surrounding the COVID-19 delta-variant. Some reports suggest nearly half of Australia’s population is in lockdown, while Asian countries are looking to reduce the spread with mobility restrictions. Still, not all news is bad; some European countries are lifting restrictions on travel and OPEC may increase the supply of oil.

Of interest today is data around home prices, consumer confidence, and Fed speak.

Graphic updated 7:20 AM ET.

What To Expect: 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 initiative trade above the $4,257.00 Point of Control (POC), up to a new overnight high (ONH) at $4,283.00.

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.

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

Prior to getting onto what’s expected for today’s trade, it is important to note some ongoing activity in the options market. Specifically, participants, despite their commitment to higher prices (as evidenced by longer-dated call activity), are likely hedging against near-term risks, like the Jackson Hole Economic symposium used in the past to signal monetary policy changes (see the graphic below for more detail). This hedging, in conjunction with lackluster breadth and poor expansion of range, cautions participants on increased volatility; a focus should be made on relatively strong issues.

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 $4,271.00 POC puts in play the $4,283.00 ONH. Initiative trade beyond the ONH could reach as high as the $4,294.75 Fibonacci-derived price target. 

In the worst case, the S&P 500 trades lower; activity below $4,271.00 puts in play the HVNodes at $4,256.75, $4,239.50, and $4,229.00.

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. Notice (1) increased churn at higher prices, (2) minimal excess on composite profile, (3) poor expansion of range, as well as (4) poor, and rather unsupportive, low volume structures beneath current price. 
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). 
Graphic: SHIFT search suggests participants were committing the most capital to call strikes at and below current prices in the cash-settled S&P 500 Index (INDEX: SPX) and Nasdaq 100 (INDEX: NDX), last week. This activity may denote (1) stock replacement, (2) hedges for underlying short positions, or (3) speculation on the upside. Also, there was a meaningful bid in September puts on the S&P 500. This dynamic suggests participants, despite their commitment to higher prices, are hedging against near-term risks, like the Jackson Hole Economic Symposium.

News And Analysis

Economy | The Bank of Japan cuts some bond purchase targets. (BBG)

Markets | BlackRock warns U.S. stocks at risk from higher taxes. (BBG)

Markets | United Airlines confirmed 270 Boeing, Airbus jet order. (REU)

Markets | Wall Street funnels cash to investors post-stress-tests. (BBG)

Markets | FTC Facebook ruling slams brakes on tech’s legal foes. (Axios)

What People Are Saying

Innovation And Emerging Trends

FinTech | State Street is building out data and digital experiences. (BZ)

FinTech | Robinhood CEO backs SEC market modernization vision. (MI)

FinTech | ICAP launching crypto platform with Fidelity, StanChart. (BBG)

FinTech | JPMorgan buys an ESG investing platform, OpenInvest. (CNBC)

Markets | Cathie Wood’s ARK Invest to create bitcoin ETF, ‘ARKB’. (CNBC)

FinTech | Deutsche Boerse is buying Swiss fintech Crypto Finance. (REU)

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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Commentary

Weekly Brief For May 31, 2021

Market Commentary

Key Takeaways: Index futures in balance.

  • Best to assume the taper tantrum happened.
  • Ahead: Fed speak and data on employment.
  • Indices traded sideways-to-higher last week.

What Happened: Coming into the large May monthly options expiration (OPEX) and extended holiday weekend, U.S. stock index futures pinned, trading sideways-to-higher.

Options: If an option buyer was short (long) stock, he or she would buy a call (put) to hedge upside (downside) exposure. Option buyers can also use options as an efficient way to gain directional exposure.

Options Expiration (OPEX): Option expiries mark an end to pinning (i.e, the theory that market makers and institutions short options move stocks to the point where the greatest dollar value of contracts will expire worthless) and the reduction dealer gamma exposure. 

Gamma is the sensitivity of an option to changes in the underlying price. Dealers that take the other side of options trades hedge their exposure to risk by buying and selling the underlying. When dealers are short-gamma, they hedge by buying into strength and selling into weakness. When dealers are long-gamma, they hedge by selling into strength and buying into weakness. The former exacerbates volatility. The latter calms volatility.

Furthermore, looking back, the movement in price was both volatile and mechanical.

After a short covering-like rally toward $4,200.00, the S&P 500 was responsively bought and sold at key visual references, suggesting a dominance by short-term participants.

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

The technically-driven trade denotes a lack of interest by institutional participants, at record highs; supply chain uncertainties and rising inflation, fiscal and monetary tightening, COVID-19 concerns, political risks, and the like, are some of the emerging concerns larger participants are looking to price in.

Of all the above risks, inflation remains the hottest topic.

Generally speaking, inflation and rates move inversely to each other. Low rates stimulate demand for loans (i.e., borrowing money is more attractive). With the rapid recovery, though, market participants fear that rates will rise to protect the economy from overheating.

Higher rates have the potential to reduce the present value of future earnings, making stocks, especially those that are high growth, less attractive. 

To note, however, rates remain range-bound; rates on the 10 Year T-Note sit below their March high and are likely to continue higher, which the market may absorb. 

How may the market absorb a rise in rates? During the so-called Taper Tantrum, in the early 2010s, rates settled in a wide range, and equities rallied big. Adding, some strategists, like Kit Juckes of Societe Generale SA (OTC: SCGLY) suggest it may be best to assume a tantrum has already happened.

“U.S. 10-year yields rose from a low of 1.4% in 2012 to 3% during their tantrum. In this cycle, the rise has been from 0.5% to a high just below 1.8%. That’s comparable in relative terms. The eventual peak in U.S. yields in 2018 was 3.25%. Can’t we accept that the taper tantrum has already happened? The important difference is that in the tantrum cycle, core CPI never got above 2 ½%. A bet on further bond weakness is a bet on inflation proving to be stickier than the Fed can cope with.”

Adding, research by JPMorgan Chase & Co (NYSE: JPM), as well as Goldman Sachs Group Inc (NYSE: GS), suggests equities may be getting cheap with reflationary themes being the go-to play. This sentiment would help explain the increased interest in S&P 500 and Nasdaq 100 call options.

Graphic: Equity valuations at their cheapest, relative to the macro in March 2009 and in the depth of the 1982 recession, according to Goldman Sachs Group Inc (NYSE: GS), via The Market Ear.
Graphic: SHIFT search suggests participants were becoming more interested in call strikes at and above current prices in the cash-settled S&P 500 Index (INDEX: SPX) and Nasdaq 100 Index (INDEX: NDX), last week.
Graphic: Physik Invest maps out the purchase of call and put options in the SPDR S&P 500 ETF Trust (NYSE: SPY), for the week prior. Activity in the options market was primarily concentrated in short-dated tenors, in strikes at and above $425.

Outlier risks remain, though; aside from the seasonally weak period, S&P 500 skew – a measure of perceived tail risk and the chances of a black swan event – rose dramatically over the past few weeks. At the same time, sentiment cooled considerably, while individual stock volatility increased the potential for a repeat of the GameStop Corporation (NYSE: GME) de-risking event.

Graphic: Goldman Sachs Group Inc (NYSE: GS) unpacks outlier risks based on the implied volatility of S&P 500 out-of-the-money options, via The Market Ear.

What To Expect: In the coming sessions, participants will want to focus their attention on where the S&P 500 trades in relation to the $4,197.25 high volume area (HVNode).

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.

That said, participants can trade from the following frameworks.

In the best case, the index trades sideways or higher; activity above $4,197.25 has the potential to reach the $4,227.00 point of control (POC). Initiative trade beyond the POC could reach as high as first the $4,238.00 overnight all-time high (ONH) and then, the $4,294.75 Fibonacci-derived price extension, a typical recovery target. 

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 index trades lower; activity below the $4,177.25 HVNode puts in play the $4,153.25 HVNode, first. Thereafter, if lower, the $4,122.25 HVNode and $4,071.00 POC come into play. 

On a cross through the $4,050.75 low volume area (LVNode), long-biased traders should beware of a rapid liquidation, as low as first the $4,015.00 and $4,001.00 POCs. In such a liquidation, odds favor a test of ~$3,970.00 50.00% retracement, as well as the $3,918.00 61.80% retracement and HVNode.

Graphic: 4-hour profile chart of the Micro E-mini S&P 500 Futures.
Graphic: Weekly candlestick charts of the S&P 500 (top left), Nasdaq 100 (top right), Russell 2000 (bottom left), and Dow Jones Industrial Average (bottom right). Nasdaq is primed for upside and has the potential to pull the S&P with it. 

News And Analysis

Trade | One of the world’s top ports expects delays on an outbreak. (BBG)

Markets | PBOC raises reserve ratio for foreign exchange holdings. (BBG)

Economy | Recovery solidifies in U.S., Europe, while EM faces risks. (Moody’s)

Markets | China bars banks from selling commodity-linked products. (REU)

Economy | Fed security purchases draw fire in hot U.S. housing market. (S&P)

Energy | Global oil demand is seen eclipsing India, Iran’s uncertainty. (S&P)

Economy | U.S. won’t experience stagflation over next few years. (Moody’s)

Economy | Non-government loans seeing a jump in forbearances. (MND)

Economy | U.S. speculative-grade corporate default rate to fall to 4%. (S&P)

Markets | Inflation, higher oil, stronger yuan point in same direction. (BBG)

Economy | U.S. retailers face headwinds from slowing sales, inflation. (S&P)

Markets | Everyone with bonds to liquidate had ample time to do so. (BBG)

What People Are Saying

Innovation And Emerging Trends

Markets | How recent growth in leveraged finance affects investors. (BZ)

Politics | Tech growth overshadowed by regulatory risks, challenges. (S&P)

Markets | Chamath: SPACs need more oversight and regulation. (BBG)

Politics | China moves to a three-child policy to boost its birthrate. (BBG)

Markets | Shakeout stirs debate over ether’s long-term potential. (BBG)

FinTech | Which banks are positioned for low rates, digital adoption. (S&P)

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.

Subscribe
Categories
Commentary

Weekly Brief For May 16, 2021

Market Commentary

Key Takeaways: Index futures are back in balance.

  • Economic data failing to surprise.
  • JPM: “Market is a little oversold.”
  • Indices reject lower prices, rotate.

What Happened: Last week, U.S. stock index futures auctioned lower alongside the release of uninspiring economic data.

In particular, the S&P 500 advertised prices below a key consolidation area but failed to solicit aggressive selling. Thereafter, participants rotated the index back inside the aforementioned consolidation, suggesting they were seeking more information to base a directional move. 

As stated in the last few weekly commentaries, participants have a lot to account for in positioning themselves during one of the weakest stretches of the year. Among their worries are inflation expectations – in part due to “choke points in global supply chains” – and stalling retail sales, as well as consumer price and job data misses. At the same time, sentiment and positioning metrics are waning while inflows remain strong, across the globe, and many year-end index targets remain clustered at and above current prices.

Of all the factors mentioned, inflation is a key concern. Why? Generally speaking, inflation and rates move inverse to each other. Low rates stimulate demand for loans (i.e., borrowing money more attractive). With the rapid recovery, though, market participants are fearful that rates may have to rise to protect the economy from overheating.

Higher rates have the potential to reduce the present value of future earnings, making stocks, especially those that are high growth, less attractive. To note, however, rates remain rangebound; rates on the 10 Year T-Note sit below their March high and are likely to continue higher, which, according to research by JPMorgan Chase & Co (NYSE: JPM), the market will likely absorb.

In fact, JPMorgan’s Marko Kolanovic, in a CNBC appearance, said that the market is a little oversold, and his S&P 500 target of $4,400.00 remains in play.

“I think market is now actually getting cheap, in some sense,” Kolanovic said. “I think we’re at the end of this upset. I think the market is going to go higher here. That said, we do still again prefer reflationary themes.”

Looking back, also, according to The Market Ear, even during the so-called Taper Tantrum, in the early 2010s, rates settled in a wide range, and equities rallied big. 

Graphic: Nasdaq 100 rallies in 2013 after rates settle in a wide range, via The Market Ear.

To add, technically speaking, after testing into a composite low volume area (LVNode), the S&P 500 rejected lower prices and quickly traded back to the valuable $4,177.25 high volume area (HVNode).

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.

This volatility was expected; coming into the May 13 reversal, stock indexes were positioning for a vicious rebound as near-term downside discovery reached a potential limit, based on market liquidity metrics and the inventory positioning of participants. According to SqueezeMetrics, the steepness of the GammaVol (GXV) curve suggested there was more risk to the upside than the downside.

More On Gamma: In the simplest way, gamma is the sensitivity of an option to changes in the underlying price. Dealers that take the other side of options trades to hedge their exposure to risk by buying and selling the underlying. When dealers are short-gamma, they hedge by buying into strength and selling into weakness. When dealers are long-gamma, they hedge by selling into strength and buying into weakness. The former exacerbates volatility. The latter calms volatility.

What To Expect: In the coming sessions, participants will want to focus their attention on where the S&P 500 trades in relation to the $4,177.25 HVNode pivot.

That said, participants can trade from the following frameworks.

In the best case, the index trades sideways or higher; activity above the $4,177.25 HVNode may reach as high as the $4,227.00 POC. Initiative trade beyond the POC could reach as high as $4,238.00 overnight high (ONH) and $4,294.75 Fibonacci price extension, a typical recovery target.

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 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 index trades lower; activity below the $4,177.25 HVNode has the potential to reach the $4,136.25 HVNode. Beyond that level, of interest is the $4,122.25 HVNode, the $4,104.75 LVNode, and the $4,069.25 HVNode. 

Trading below the $4,029.25 overnight low (ONL) suggests a continuation of the bear trend. Caution longs.

Graphic: 4-hour profile chart of the Micro E-mini S&P 500 Futures.
Graphic: Weekly candlestick charts of the S&P 500 (top left), Nasdaq 100 (top right), Russell 2000 (bottom left), and Dow Jones Industrial Average (bottom right).
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 Index (INDEX: NDX), last week. It appears that participants were positioning themselves in strikes across further-dated expiries (e.g., June 18, 2021) suggesting more commitment.

News And Analysis

Markets | Rates remain resilient after the recent inflation scare. (MND)

Markets | Caught-short strategists are a stealth market accelerant. (BBG)

Ratings | Out-of-court restructurings may lead to repeat defaults. (S&P)

Energy | Oil, and gas benefiting from rising crude, value rotation. (BBG)

Energy | Colonial Pipeline resumes normal operations after hack. (Axios)

Markets | Selected indicators – global automotive manufacturing. (REU)

Ratings | Risk of supply chain financing, partial asset sell-downs. (S&P)

Economy | U.K.’s worse recession to turn into a stronger recovery. (S&P)

Economy | Don’t you dare say stagflation; safeguards are slipping. (BBG)

What People Are Saying

Innovation And Emerging Trends

Working | Reimagining the workplace – adapting to new normals. (S&P)

Banking | US banks could cut nearly 200K jobs over the next decade. (FT)

Space | China has made history with its successful Mars landing. (Axios)

FinTech | Cryptocurrency, and blockchain must lead in sustainability. (TC)

Energy | California Governor proposes a $3.2B EV investment plan. (TC)

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.

Subscribe
Categories
Commentary

Daily Brief For May 12, 2021

Market Commentary

Index futures in balance.

  • Tugging as sectors push and pull.
  • Ahead: Consumer prices, inflation.
  • Indices settle, position for resolve.

What Happened: After responsive buying the day prior, U.S. stock index futures auctioned lower overnight, ahead of data on inflation.

Graphic updated at 6:35 AM EST.

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 the initiative trade down to the $4,110.50 minimal excess low. Thereafter, responsive buying brought the S&P 500 back in range. Later, participants found it most favorable to transact at last Tuesday’s POC, a development that suggests visually-driven technical traders may be out in full force.

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

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.

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

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.

Further, this week’s early dip comes ahead of inflation figures that will provide clarity on emerging price pressures. Generally speaking, inflation and rates move inverse to each other. Low rates stimulate demand for loans (i.e., borrowing money more attractive). With the rapid recovery, though, market participants are fearful that rates may have to rise to protect the economy from overheating.

That’s pretty significant.

Higher rates may reduce the present value of future earnings, making stocks, especially those that are high growth, less attractive. To note, however, rates haven’t budged much since March. Rates on the 10 Year T-Note sit well below their March high.

That said, here is a quote to sum current conditions: “For an economy coming out of a pandemic, normal rules don’t apply,” said Matthew Cady, an investment strategist at Brooks Macdonald. “For broad sustained inflation you really need to see much tighter labor markets, and the bottom line is that the CPI out-turn due this week is very unlikely to change that picture.”

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 $4,141.00 POC targets first the $4,163.00 POC and then the $4,177.25 composite high volume (HVNode) pivot. Initiative trade beyond the pivot could reach as high as the $4,224.75 HVNode. 

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.

In the worst case, the S&P 500 trades sideways or lower; activity below the $4,141.00 POC targets first the $4,103.00 excess low. Thereafter, if no response, participants may look for responses at the $4,128.00 and $4,093.00 POCs.

At this juncture, it pays not to be involved; the risk-to-reward of establishing new swing positions, in a tight trading range, is poor. Responsive trade is the course of action. Only after trading beyond the HVNode pivot, or excess low, may participants have the conviction to participate in initiative trades.

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 Dow is the strongest of the four. The Nasdaq is beginning to strengthen, relative to its peers. 
Graphic: Physik Invest maps out the purchase of call and put options in the SPDR S&P 500 ETF Trust (NYSE: SPY), for May 11. Activity in the options market was primarily concentrated in very short-dated tenors, in strikes as low as $396.00, which corresponds with ~$4,050.00 in the cash-settled S&P 500 Index (INDEX: SPX). Despite some size bets on both sides of the market, a short duration suggests an overall lack of commitment. 
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), Tuesday. Exposure was concentrated in both the May and June monthly expiries.

News And Analysis

Commodities | Colonial faces deadline to decide on hacked pipeline restart. (BBG)

Politics | Israel and Hamas escalate deadly strikes as the U.S. calls for calm. (BBG)

Markets | SPAC fees to support banks through 2022 even as deals dry up. (BBG)

Markets | COVID-19 concerns, chip sell-off roil the Taiwanese stock market. (WSJ)

Markets | SEC warning over bitcoin futures risks in mutual fund investments. (BBG)

Markets | A higher U.S. corporate tax rate is not a key credit risk driver. (Fitch)

What People Are Saying

Innovation And Emerging Trends

Economy | Housing-market surge is making the cheapest homes the hottest. (WSJ)

Markets | Media account Litquidity Capital is the Meme King of Wall Street. (VOX)

FinTech | eBay joined the NFT frenzy, will allow sale of NFTs on its platform. (REU)

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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Commentary

Daily Brief For May 10, 2021

Market Commentary

Index futures in balance.

  • Inflation talk; reflation back in play.
  • Ahead is Fed speak and earnings.
  • Indices divergent. Expecting chop.

What Happened: U.S. stock index futures were divergent. 

The S&P 500 and Dow Jones Industrial Average discovered higher prices while the Nasdaq 100 and Russell 2000 backed off into the prior range.

Graphic updated at 7:25 AM EST.

What To Expect: 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 the prior session’s regular trade, the best case outcome occurred, evidenced by initiative trade above the $4,210.75 rally-high, which is significant because that was the highest mark achieved during a prior failed break from balance.

This comes as market participants double down on the so-called “reflation” trade. JPMorgan Chase & Co (NYSE: JPM) strategists, led by Marko Kolanovic, warned many managers will “need to quickly switch gears from their deflationary playbook or risk an ‘inflation shock,’” according to Bloomberg.

Beyond that snippet of fundamental information, we move to what matters right now, technically. 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 $4,238.00 overnight high (ONH) puts in play the $4,266.50 Fibonacci-derived price extension.

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 $4,216.00 low-volume area (LVNode) puts in play the $4,210.75 rally-high. Thereafter, if lower, the HVNodes at $4,199.25, $4,190.75, and $4,177.25 (a major pivot) all become in play.

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: 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 Dow is the strongest of the four. The Nasdaq is the weakest.
Graphic: Physik Invest maps out the purchase of call and put options in the SPDR S&P 500 ETF Trust (NYSE: SPY), for the week ending May 7, 2021. Activity in the options market was primarily concentrated in short-dated tenors, in strikes as low as $404.00, which corresponds with $4,030.00 in the cash-settled S&P 500 Index (INDEX: SPX).

News And Analysis

Commodities | Gasoline futures rise after cyberattack shuts down a vital pipeline. (CNBC)

Recovery | Dr. Fauci says masks could become seasonal after COVID pandemic. (CNBC)

Economy | Euro zone investor morale rises to the highest level since March 2018. (REU)

Markets | Second-biggest cryptocurrency ethereum breaks $4,000 to hit a record. (REU)

Economy | Consumer on one of the healthiest footings in decades, post-COVID-19. (BLK)

What People Are Saying

Innovation And Emerging Trends

Business | UBS dangles $40,000 bonuses to slow junior banker defections. (BBG)

FinTech | Signalling privacy is coming to DeFi, Sienna Network raises $11.2M. (TC)

Trade | Japan mulling alternatives to Suez Canal after the Ever Given shock. (AJ)

ESG | Blackrock insider explains how the ESG investing ‘fantasy’ is distracting. (FP)

Markets | Nasdaq gets the green light from SEC for volatility index options. (TTN)

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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Commentary

Weekly Brief For May 9, 2021

Market Commentary

Key Takeaways: Index futures in price discovery.

  • JPMorgan puts emphasis on reflation.
  • Earnings were great. NFP not so much.
  • Indices diverge. S&P 500, Dow higher.

What Happened: Last week, U.S. stock index futures were divergent with the Nasdaq 100 and Russell 2000 lagging behind the S&P 500 and Dow Jones Industrial Average.

The push-pull between equity indices comes as market participants doubled down on the so-called “reflation” trade. JPMorgan Chase & Co (NYSE: JPM) strategists, led by Marko Kolanovic, warned many managers will “need to quickly switch gears from their deflationary playbook or risk an ‘inflation shock,’” according to Bloomberg.

“We expect a strong pickup in inflation this year, which the market will likely be slow to recognize and is poorly positioned for,” Kolanovic and his colleagues said. “A combination of boomy global growth and significant bottleneck price pressures should keep inflation on an upward trajectory while most central banks remain committed to their very accommodative stances and are looking through the inflation pickups.”

Kolanovic recommends participants cut cash and credit to increase their allocations to cyclical and value assets.

In parallel, while companies look to cut costs and boost prices, the April jobs report failed to meet expectations as people who increasingly looked for jobs had a difficult time getting hired.

Graphic: Bloomberg data shows first-quarter earnings from S&P 500 companies surging.

“We still think growth will be historically strong this year, but today’s jobs report is a reminder that there’s still work to be done,” Ally Inc-owned Ally Invest strategist Callie Cox said. “It’s a big data point for the inflation worries, too. If hiring slows for the next few months, businesses may not be able to pass on higher costs to consumers.”

Adding, though the April payroll miss was big enough to likely limit the Federal Reserve’s taper or rate hike discussions, traders signaled otherwise.

Earlier this week, Bloomberg reported on a large option bet over quicker rate hikes by the Federal Reserve. The Eurodollar bet carries a notional value of $40 billion and is focused on a potential surprise at the Jackson Hole symposium, used in the past to signal policy changes.

Graphic: Eurodollar bet on SHIFT’s institutional platform. The purchase of 98.00 strike put options suggests traders are looking to add “two Fed hikes to [current] expectations.”

Moving on, technically speaking, equity indexes are at an interesting juncture. 

The Dow Jones Industrial Average and S&P 500 resolved their multi-week consolidations, to the upside, while the Russell 2000 is rotating within prior range and Nasdaq 100 is relatively weak, losing support and auctioning into a low-volume 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.

Further, the strong break in the S&P 500, which targets the Fibonacci-derived price extension near $4,300, has thus far been validated by numerous hours of trade outside of the consolidation zone (i.e., balance area). To note, though, the structure left behind Friday’s price discovery was very poor, opening the door for potential repair.

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).

Participants ought to be cautiously optimistic given the weakness in heavily-weighted sectors like technology. Should weakness accelerate, the S&P 500 may succumb. 

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 Dow is the strongest of the four. The Nasdaq is the weakest.

What To Expect: In the coming sessions, participants will want to focus their attention on where the S&P 500 trades in relation to the balance area it just broke from.

That said, participants can trade from the following frameworks.

In the best case, the index trades sideways or higher; activity above the $4,210.75 boundary targets the $4,235.25 price extension. Initiative trade beyond the price extension could reach as high as the $4,266.50-$4,272.75 confluence of Fibonacci-derived price targets.

In the worst case, the index trades lower; activity below $4,210.75 puts in play the $4,179.50 spike base. Trading below the spike base negates end-of-week bullishness.

Spikes: Spike’s mark the beginning of a break from value. Spikes higher (lower) are validated by trade at or above (below) the spike base (i.e., the origin of the spike).
Graphic: 65-minute 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 the week ending May 7, 2021. Activity in the options market was primarily concentrated in short-dated tenors, in strikes as low as $404.00, which corresponds with $4,030.00 in the cash-settled S&P 500 Index (INDEX: SPX).

News And Analysis

Economy | Forbearance exits soar as more plans expire last week. (MND)

Economy | Demand decline fuels price wars across mortgage industry. (WSJ)

Markets | Focus shifts to U.S. prices after the jobs disappointment. (BBG)

Politics | Infrastructure talks could set course of Biden spending plans. (WSJ)

Markets | New SEC chairman sets sights on firms Citadel and Virtu. (WSJ)

Markets | Pipeline hack may push pump rices to $3, ahead of holiday. (BBG)

Recovery | Fauci says ‘no doubt’ the U.S. undercounted virus deaths. (BBG)

What People Are Saying

https://twitter.com/LanceBeggs/status/1391362320756973568?s=20

Innovation And Emerging Trends

Crypto | German, U.S. regulators tighten focus on the crypto market. (FT)

Space | China’s ambitions in space: national pride or taking on U.S. (FT)

Crypto | Crypto startup Dfinity set to launch a blockchain AWS rival. (FT) 

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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Commentary

Daily Brief For May 5, 2021

Market Commentary

Index futures attempt to exit balance.

  • Yellen walks back rate comment.
  • Ahead is employment, ISM data.
  • Divergence grew, low conviction.

What Happened: U.S. stock index futures auctioned higher overnight as Treasury Secretary Janet Yellen clarified her comments on interest rates. 

The Secretary’s note that rates may “have to rise somewhat” to protect the economy from overheating weighed on the market. Most hurt was the Nasdaq 100; higher rates may reduce the present value of future earnings, making innovation-driven growth stocks less attractive.

Graphic updated 8:00 AM EST.

What To Expect: Wednesday’s regular session (9:30 AM – 4:00 PM EST) in the S&P 500 will likely open just outside 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 initiative trade below the $4,167.25 low, which is significant because it was a level that participants, for numerous sessions, supported.

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 Dow is the strongest of the four. The Nasdaq is the weakest.

For today, participants can trade from the following frameworks. 

In the best case, the S&P 500 trades sideways or higher; activity above $4,178.00 high-volume area (HVNode) targets the $4,189.00 POC. Initiative trade beyond the POC could reach as high as the $4,200.00 HVNode and $4,210.75 minimal excess high. 

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.

In the worst case, the S&P 500 trades lower; activity below the $4,178.00 HVNode puts in play the prior day’s POC near $4,141.00 and the $4,110.50 minimal excess low. Trade below $4,110.50 puts in play the $4,093.00 POC, $4,082.75 HVNode, and $4,067.00 POC.

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.
Graphic: 4-hour profile chart of the Micro E-mini S&P 500 Futures. Noting the $4,178.00 pivot.
Graphic: Physik Invest maps out the purchase of call and put options in the SPDR S&P 500 ETF Trust (NYSE: SPY), for May 4, 2021. Notable activity in the options market was primarily concentrated on the call-side, in short-dated tenors, in strikes at and around $414.00, which corresponds with $4,140.00, or so, in the cash-settled S&P 500 Index (INDEX: SPX).
Graphic: SHIFT search suggests participants are still not as inclined to add call-side exposure, through the month of May, in the SPDR S&P 500 ETF Trust (NYSE: SPY).

News And Analysis

Economy | Biden’s Fed choices add uncertainty for inflation-wary investors. (BBG)

Economy | Post-COVID U.S. births drop to the lowest level since the 1970s. (BBG)

Commodities | IEA: Governments should consider stockpiling battery metals. (BBG)

Markets | Facing chips shortage, Biden may shelve blunt tool used in COVID. (REU)

Economy | Private payrolls show big gain in April but still short of expectations. (CNBC)

Markets | Commodities jump to highest since 2011 on COVID-19 rebound. (BBG)

Economy | Weekly mortgage demand stalls as rates rise, competition hurts. (CNBC)

What People Are Saying

Innovation And Emerging Trends

FinTech | CME exchange plans to permanently close physical trading pits. (REU)

FinTech | Robinhood CEO holds up crypto exchanges as model for settlement. (TB)

Venture | Proposed changes to capital gains could affect VCs differently. (CB)

Crypto | S&P Dow Jones launches series of cryptocurrency benchmarks. (MM)

FinTech | Berkshire Hathaway’s stock price too much for Nasdaq computers. (WSJ)

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.

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Commentary

Daily Brief For May 4, 2021

Market Commentary

Index futures attempt to exit balance.

  • Global reopening, vaccinations rising.
  • Ahead: Vehicle Sales, Factory orders.
  • Markets balance, position for resolve.

What Happened: U.S. stock index futures rejected a breakout attempt and explored lower prices, overnight.

Ahead are earnings, data on trade, factory orders, durable goods, and Fed speak.

Graphic updated 7:30 AM ET.

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

Adding, during the prior day’s regular trade, the worst-case outcome occurred, evidenced by trade below the $4,186.75 balance boundary, which is significant because it denoted a clear, visual break-out point.

Adding to our narrative, according to Joseph Fahmy, Investment Advisory Representative at Zor Capital, from here on out, either (1) growth stocks stabilize and move higher, or (2) weak breadth pulls down the overall market. 

Supporting this belief is a weak reaction to earnings, interest rate volatility, tax selling, as well as stretched sentiment.

Still, the market is in a technically bullish position. A break below the S&P 500’s minimal excess low at $4,110.50 would suggest a change in conditions and the potential for lower.

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; crossing back into the prior day’s trading range, marked by the $4,181.00 regular-trade low (RTH Low), targets the $4,189.00 POC. Initiative trade beyond the POC could reach as high as the $4,194.25 low volume area (LVNode), and then the $4,205 POC. 

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.

Initiative Buying (Selling): Buying (selling) within or above 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.

In the worst case, the S&P 500 trades lower; activity below $4,167.25 could reach as low as the $4,153.25 and $4,137.25 high volume areas (HVNodes).

Graphic: 65-minute 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 May 3. Activity in the options market was primarily concentrated in short-dated tenors, in strikes as low as $413.00, which corresponds with $4,130.00 in the cash-settled S&P 500 Index (INDEX: SPX).

News And Analysis

Politics | Biden open to options on spending as Congress takes over. (BBG)

Economy | Near-term volatility in inflation as economic restart progresses. (BLK)

Markets | Robinhood raked in $331 million from clients’ trading activity. (CNBC)

Economy | Metrics show strong U.S. business sentiment hit a snag in April. (Axios)

Economy | Treasury quadruples borrowing estimates to pay for stimulus. (BBG)

Trade | Truckers expect the U.S. transport capacity crunch to persist. (WSJ)

Banking | Cash-rich U.S. banks moving to reduce corporate deposits. (FT)

Commodities | Broad commodities price boom amplifies ‘supercycle’ talk. (FT)

Economy | Yellen to appoint Senior Fed official to run top bank regulator. (WSJ)

What People Are Saying

Innovation And Emerging Trends

Media | Why Verizon sold AOL and Yahoo for 1% of their peak valuation. (Axios)

FinTech | Mastercard adds 6 startups to Start Path accelerator program. (CT)

FinTech | Canada-based Wealthsimple raises $610M at a $4B valuation. (TC)

FinTech | Founder at Miami-based accelerator talks exits, #MiamiTech. (BZ)

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.

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Categories
Commentary

Daily Brief For May 3, 2021

Market Commentary

Index futures in balance.

  • Global markets quiet on holiday.
  • Ahead: Fed speak, employment.
  • Potential for directional resolve.

What Happened: U.S. stock index futures auctioned higher overnight. The S&P 500, Russell 2000, and Dow Jones Industrial Average are relatively strong compared to the Nasdaq 100.

Aside from earnings, key events this week include a manufacturing data release, as well as talks by Fed Chair Powell, Chicago Fed President Charles Evans, and Cleveland Fed’s Loretta Mester. The Bank of England and Bank of Australia will provide clarity on their monetary policies. Employment data will come Friday. 

Graphic updated 7:20 AM EST.

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

Balance-Break + Gap Scenarios: Monitor for acceptance (i.e., more than 1-hour of trade) outside of the balance area. This can come in the form of sideways trade or range expansion.

Gaps ought to fill quickly. Should they not, that’s a signal of strength; do not fade. Leaving value behind on a gap-fill or failing to fill a gap (i.e., remaining outside of the prior session’s range) is a go-with indicator.

Auctioning and spending at least 1-hour of trade back in the prior range suggests a lack of conviction; in such a case, do not follow the direction of the most recent initiative activity.

Adding, during Friday’s regular trade, the best case outcome occurred, evidenced by sideways trade above $4,168.00, which is significant because it marked a prior session’s regular-trade low (RTH Low).

This attempt to move from balance comes after weeks of mechanical trade in the range between $4,186.75 and $4,110.50. It is likely that, given last week’s heavy economic and earnings calendar, participants have more information to initiate a directional move. 

For today, participants can trade from the following frameworks. 

In the best case, the S&P 500 trades sideways or higher; activity above $4,197.25 low-volume area (LVNode) targets the $4,205.00 VPOC. Initiative trade beyond the VPOC could reach as high as the $4,210.75 regular-trade high (RTH High), and then, the Fibonacci cluster between $4,222.50-4,237.50. 

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.

In the worst case, the S&P 500 trades lower; activity below the $4,186.75 balance-area boundary targets the $4,167.25 RTH Low. Thereafter, if lower, participants should look for responses at the $4,132.00 value-area low (VAL) and the $4,110.50 minimal excess low.

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.
Graphic: 65-minute profile chart of the Micro E-mini S&P 500 Futures.

News And Analysis

Travel | EU pushes end to travel restrictions for vaccinated tourists. (BBG)

Markets | Ether hits $3,000 as Bitcoin’s crypto dominance declines. (BBG)

Economy | Warren Buffett sees inflation, even if Jerome Powell doesn’t. (Axios)

Markets | Demand surges for New York Fed’s reverse repo facility. (KFGO)

Markets | Abel is likely successor at Berkshire Buffett tells CNBC. (BBG)

Markets | Robinhood’s core business more than tripled in first quarter. (BBG)

Trade | Intel CEO says chip shortage will persist for couple years. (BBG)

Recovery | COVID-19 cases fall sharply in U.S., vaccinations rise. (CNBC)

Economy | Bank of Canada tapers asset purchases, while others wait. (Moody’s)

What People Are Saying

Innovation And Emerging Trends

Trading | London Metals Exchange to announce open outcry decision. (REU)

FinTech | Fintech groups form as industry scrutiny ramps on Capitol Hill. (S&P)

FinTech | Robinhood deepens ties with JPM by using bank for transfers. (CNBC)

FinTech | Digital Dollar Project to launch five U.S. central bank cryptos. (REU)

Travel | Airport security app Clear looks to score with vaccine passport. (REU)

FinTech | TradeTech INX estimates $125M raised in token, equity offer. (REU)

 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.

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