Daily Brief For May 11, 2021

Market Commentary

Index futures in balance.

  • Inflation fears stoking weakness.
  • Ahead is JOLTS data, Fed speak.
  • Index futures lower, tech weighs.
Graphic updated 7:55 AM EST.

What Happened: U.S. stock index futures auctioned lower, overnight, alongside fears of rising inflation. Most affected were heavily-weighted index constituents (e.g., Facebook, Netflix, Google, Microsoft, Amazon, Nvidia, and Tesla), or stocks that have the most to lose in an environment that favors cyclical and value assets.

Adding, despite the Federal Reserve’s commitment to limiting talk of taper and rate hikes, traders are positioning themselves for a change in tone. Activity in the 98.00 put strike options, in the Eurodollar, suggests traders are betting on a potential surprise at the Jackson Hole symposium.

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.”

What To Expect: Tuesday’s regular session (9:30 AM – 4:00 PM EST) in the S&P 500 will open far from prior-range and -value, suggesting a limited potential for immediate directional opportunity. Reason being — a state of shock, as a result of a severe overnight drop.

Adding, during the prior day’s regular trade, the worst-case outcome occurred, evidenced by initiative trade below the $4,216.00 low volume area (LVNode). The HVNodes at $4,199.25, $4,190.75, and $4,177.25 (a major pivot) all were in play, yesterday.

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.

For today, participants can trade from the following frameworks. 

In the best case, the S&P 500 trades sideways or higher; activity above the $4,169.75 overnight pullback high targets the $4,177.25 HVNode pivot. Initiative trade beyond the pivot puts in play the $4,191.25, $4,199.25, $4,211.50, and $4,224.75 HVNodes. 

In the worst case, the S&P 500 trades lower; activity below the $4,177.25 pivot targets the $4,141.00 VPOC. Thereafter, if lower, participants may look for responses at the $4,137.25 and $4,122.75 HVNodes. Auctioning through $4,130.25 increases the odds of trade to the poor structure at $4,110.50.

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.
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: SHIFT search suggests participants were very interested in put strikes at and below $4,200.00 in the cash-settled S&P 500 Index (INDEX: SPX), May 10.

News And Analysis

Economy | The Fed is playing with fire by clinging to emergency policies. (WSJ)

Economy | Homebuying sentiment negative despite economic improvement. (MND)

Markets | Pipeline shutdown could push prices at the pump above $3 a gallon. (CNBC)

Economy | Near-term activity data unlikely to affect Fed’s policy rate outlook. (BLK)

Economy | COVID one year on, global infrastructure proves its resilience. (Moody’s)

Recovery | New U.S. COVID infections fall to the lowest level in 11 months. (FT)

What People Are Saying

Innovation And Emerging Trends

Markets | What happens to stocks after the Fed stops raining money? (WSJ)

Housing | Americans moved during the pandemic. Where did they go? (WSJ)

Commodities | The role of critical minerals in the clean energy transition. (IEA)

Markets | More whacks around the head for investors after jobs data. (BBG)


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.


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.


‘Rising Tide Lifts All Boats’: Market Commentary For The Week Ahead

Key Takeaways:

What Happened: U.S. index futures auctioned to new all-time highs before weakening into Friday’s derivative expiry.

What Does It Mean: After participants established a rally-high in the December 9 overnight session, the S&P 500 liquidated down to the balance-area boundary near $3,625.00.

After the December 14 gap open on COVID-19 coronavirus vaccine and stimulus progress, for the remainder of the week, indices negated prior selling, establishing a new all-time high. Friday’s trade managed to repair some structural deficiencies left in the aforementioned advance.

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 the low-volume node (LVNode) near $3,680.00. Low-volume areas denote directional conviction and ought to resist future auction rotations. Auctioning through the LVNode would foreshadow further rotation and trade as low as the balance-area low.

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

  1. Both sentiment and positioning are historically stretched, while the recovery remains uneven
  2. Inflation remains cool due to the profound influence of disruptive innovation.
  3. U.S. Congress reaches deal on COVID-19 aid package, plans votes for Monday. 
  4. The decline in realized correlation due to factor and sector rotation, as well as the return of systematic option selling strategies will push the long-gamma narrative in which volatility is suppressed and the market pins or slowly rises in a range-bound fashion.
  5. The S&P 500’s higher-time frame breakout remains intact (see chart below); JPMorgan Chase & Co. (NYSE: JPM) confirms equities will rally short-term with the S&P 500 auctioning as high as $4,000.
  6. Despite high CAPE ratios, stock-market valuations aren’t that absurd.

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

In the best case, buyers maintain conviction and hold the index above the $3,680.00 LVNode. Auctioning below said reference denotes a change in conviction. Participants would then look for a response near the $3,667.75 HVNode. Failure to remain above the HVNode would portend rotation, further balancing. 

In the worst case, participants initiate below the $3,625.00 balance-area low, jeopardizing the higher-time frame breakout.

Conclusion: As BlackRock Inc (NYSE: BLK) said, “a rising tide lifts all boats”; though financial markets have largely priced in positive news surrounding vaccines and stimulus, the rally remains intact, bolstered by a drive for yield — technical factors as a result of systemic and hedge fund strategies, among other things.

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

Levels Of Interest: $3,740.75 and $3773.75 price extensions, $3,724.25 all-time rally high, the micro-composite HVNode at $3,707.75, $3,691.00, and $3,667.75, as well as the $3,680 LVNode and poor structure near the $3,625.00 balance-area low.

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

Photo by Fede Roveda from Pexels.


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.