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Market Commentary For 12/22/2020

What Happened: U.S. index futures rebounded, negating the weekend liquidation on pandemic worries.

What Does It Mean: During Monday’s session, responsive buyers surfaced at the S&P 500’s balance-area boundary, the low end of the tight range the index has been trading in for two weeks. Since then, the S&P 500 initiated through the poor structure (e.g., low-volume areas) left by the selling range extension, as well as the $3,667.75 high-volume node (HVNode), the most positive outcome.

Given the tempo of the selling, poor structure left behind, and subsequent retracement, it’s very likely that the range extension was the result of weak-handed, short-term buyers liquidating positions in panic.

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

In the best case, buyers hold the the index above its $3,667.75 HVNode. Holding said reference would be indicative of balance after a large recovery; in such case, participants would look for a continuation up to the $3,700.00 and $3,707.75 HVNodes. Anything higher targets the $3,724.25 overnight rally high.

Levels Of Interest: The $3,667.75, $3,700.00 and $3,707.75 HVNodes, as well as the $3,724.25 overnight high.

Bonus: Big-picture breakout remains intact.

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

Market Commentary For 12/21/2020

What Happened: In spite of positive stimulus developments, U.S. index futures liquidated alongside news of emergency actions in Europe against a new strain of the COVID-19 coronavirus.

What Does It Mean: Friday’s session found responsive buyers at the low-volume node (LVNode) near $3,680.00. Low-volume areas denote directional conviction and ought to resist future auction rotations.

Overnight, the S&P 500 index future auctioned through the aforementioned LVNode — the worst outcome — before responsive buying surfaced near the balance-area low.

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

In the best case, buyers respond and auction the index above the $3,667.75 high-volume node (HVNode). Holding said reference and trading into Friday’s range would negate much of the selling activity, the most positive outcome.

In the worst case, if the S&P 500 remains below the $3,667.75 HVNode, participants can expect further rotation and balance.

Auctioning below the $3,596.00 excess low would put the rally in question.

Levels Of Interest:  The $3,667.75 high-volume node, as well as the excess low at $3,596.00.

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Commentary

Market Commentary For 12/18/2020

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

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

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

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

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

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

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

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

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Market Commentary For 12/17/2020

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

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

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

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

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

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

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

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

Bonus: Opportunities unfolding.

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Commentary

Market Commentary For 12/16/2020

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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Commentary

Market Commentary For 12/14/2020

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

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

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

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

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

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

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

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

Bonus: Opportunities unfolding.

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Commentary

Market Commentary For 12/11/2020

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

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

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

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

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

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

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

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

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

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Market Commentary For 12/8/2020

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

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

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

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

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

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

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

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Market Commentary For 12/7/2020

What Happened: Alongside news of heightened geopolitical tensions, U.S. index futures liquidated overnight, stopping short of an important high-volume node, the market’s most recent perception of value.

What Does It Mean: During Friday’s regular trading in the S&P 500, initiative buyers extended range — through the $3,682.00 balance-area high — up to the $3,700.00 high gamma strike.

In overnight trade since, participants took back the entire breakout, auctioning back below the $3,682.00 balance-area boundary, before responsive buying surfaced above the $3,667.75 high-volume node. Given that the S&P 500 is trading within prior range and value, opportunity has been dramatically reduced.

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

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

In the worst case, an initiative drive back below $3,682.00 would portend a response at the $3,667.75 high-volume node. Auctioning even lower would denote a clear change in conviction. As a result participants would look to whether the $3,640.00 balance boundary holds. Breaking that reference puts the rally on hold.

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

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Commentary

Market Commentary For 12/1/2020

What Happened: Alongside optimism surrounding a coronavirus vaccine and the economic recovery, stock index futures are trading out of range and balance, improving the prospects for further upside.

What Does It Mean: In Monday’s regular trading, responsive buying surfaced after the repair of poor structures left behind the November 24 upside discovery process.

Simply put, the S&P 500 established a v-shaped recovery — 100% retracement of the November 30 session high — after a test of the high-volume node near $3,600 offered responsive participants a favorable buying opportunity.

Overnight, buyers further extended range, breaking a week-long balance area.

Given the bullish break above the responsive selling ledge at $3,640, participants now know that initiative buyers are firmly in control, and the primary target remains the $3,668.75 all-time rally high.

Due to the gap’s size, the odds of range expansion during the day session are lower. As a result, participants should monitor whether the resistive $3,640 ledge now turns into support. Breaking below that level puts the rally on hold, and suggests further balance.

Levels Of Interest: $3,640 ledge, $3,664.75 overnight high, $3,668.75 all-time rally high.