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Commentary

Market Commentary For 12/2/2020

What Happened: A day after major indices established record highs, futures remain outside of a bigger balance-area, suggesting acceptance of higher prices and improved odds of further upside.

What Does It Mean: In Tuesday’s regular trading, initiative buyers extended range, further confirming the break from last week’s balance area.

Thus far, there were two significant attempts overnight to auction back into the balance area. Auctioning below the upper balance boundary, below the $3,640 ledge, would be the most negative outcome, and could foreshadow a test as low as the lower balance area boundary, near $3,590.

Given that the S&P 500 remains outside of the week-long balance area, above the $3,640 ledge, participants know that initiative buyers remain in control and pullbacks are buyable. Auctioning into and below the balance area boundary, puts the rally on hold, and suggests further balance.

Levels Of Interest: $3,640 ledge.

Bonus: The S&P 500’s higher timeframe breakout remains intact.

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

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Commentary

Market Commentary For 11/30/2020

What Happened: After posting all-time closing highs, stock index futures are divergent and trading in-range, suggesting non-conviction.

What Does It Mean: During weekend trade, participants tested lower, into the $3,600 high-volume area on the S&P 500’s macro-composite profile, before responsive buying brought the index back into range.

Given the overnight recovery thus far, participants ought to monitor for a response at the $3,631 micro-composite high-volume node. An initiative drive higher, through this figure, may see a complete retracement of the overnight range, up to the $3,640 ledge. Breaking the ledge increases the likelihood of continuation up to the $3,655 and $3,668.75 rally highs.

Otherwise, the rally remains on hold as long as the index remains below the $3,631 high-volume node (e.g., a go/no-go pivot point).

Levels Of Interest: $3,631 high-volume node.

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Commentary

‘Dualism’: Market Commentary For The Week Ahead

Key Takeaways:

  • Decline in cash levels is a sign of stretched sentiment. 
  • Positioning: Odds of sustained directional resolve low.
  • Potential confirmation of multi-month balance-break.

What Happened: During last week’s shortened holiday trade, U.S. index futures broke out to new all-time highs.

What Does It Mean: After Tuesday’s initiative upside drive alongside news that provided clarity on the election transition, participants rotated back over the $3,580 balance-area boundary, invalidating the prior week’s initiative selling activity. Thereafter, conviction disappeared and the market remained range-bound, as evidenced by a non-participatory delta (i.e., the non-presence of committed buying) and mechanical trade (i.e., low-excess at the edges of developing balance).

Pictured: Profile overlays on a 15-minute candlestick chart of the Micro E-mini S&P 500 Futures

What To Expect: During Friday’s shortened holiday session, the S&P 500 remained in balance, further auctioning and accepting value into Tuesday’s excess high, which marked an end to the upside discovery process. 

Given that initiative buyers remained in control after auctioning into the micro-composite high-volume node at $3,631, the fairest price to do business after Tuesday’s upside drive, participants come into Monday’s session knowing the following: 

  1. The amount of cash investors are holding in their portfolios fell to levels last seen prior to the February sell-off. 
  2. Market sentiment, as represented by Citigroup Inc’s (NYSE: C) Panic/Euphoria Model, is historically stretched.
  3. Tuesday’s upside impulse, through the low-volume node at $3,580, was reminiscent of short-term, momentum-driven buying. 
  4. Holiday trade was dominated by low-volume and responsive participation, implying the non-presence of conviction and institutions (e.g., funds that transact at non-technical levels).
  5. Positioning suggests dealers are long gamma, meaning they sell into strength and buy into weakness, suppressing volatility and the potential for directional resolve.
Graphic by Spotgamma, taken from The Market Ear

Therefore, given the acceptance of higher prices, the following frameworks for next week’s trade apply.

If participants manage to spend time and build value above the $3,631 micro-composite high-volume node, then initiative buyers remain in control — nearest targets include the $3,655 and $3,668.75 rally highs.

Otherwise, the auction ought to find responsive buyers near the high-volume node. An initiative drive below that figure would put the rally on hold, and would target first $3,620, and then the node near $3,610.

Conclusion: Though sentiment and positioning imply limited potential for further upside, the market remains in a strong technical uptrend bolstered by factors including a divided government, vaccine administration, rebound in profits, low rates, and a small rise in the yield curve.

As of now, the S&P 500 is on the verge of confirming a multi-month balance-break.

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

Levels Of Interest: Micro-composite HVN at $3,631, the $3,655 and $3,668.75 rally highs, as well as the nodes near $3,620 and $3,610.

Cover photo courtesy by cottonbro from Pexels.

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Commentary

Market Commentary For 11/27/2020

What Happened: On hopes of a sustained economic rebound, stock index futures are trading higher, in balance, suggesting acceptance of higher prices in the S&P 500.

What Does It Mean: In Wednesday’s regular trading, participants balanced, accepting higher prices near the $3,630 balance-area high, as evidenced by the non-presence of range expansion.

Now, buyers extended their gains, auctioning into Tuesday’s excess high, which ended the upside discovery process when responsive sellers were found near the $3,650 mark, a balance-area projection.

As a result, participants come into Friday’s session knowing that (1) the market has accepted Tuesday’s advance, (2) the auction is trading into a prior excess high, above the $3,630 balance-area boundary, and (3) the odds do not favor range expansion during a shortened, holiday session.

Therefore, today will likely further confirm Tuesday’s activity was the start of a new trend to the upside. Since the auction below $3,625, into Tuesday’s poor profile structure, did not attract further selling, initiative buyers remain in control. Thus, participants must monitor for signs of (1) continuation or (2) balance.

In case of the former, participants ought to take out the $3,655 overnight rally high first. In case of the latter, the auction ought to find responsive buyers near $3,630, a prior resistive balance-area high. An initiative drive below below that figure would put the rally on hold, and would target first $3,620, and then the node near $3,610.

Levels Of Interest: $3,655 overnight high, $3,630 balance-area high/high-volume node.

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Commentary

Market Commentary For 11/25/2020

What Happened: As investors await a flurry of economic data including GDP estimates, stock index futures are trading in range after a day of active discovery that found acceptance near the $3,630 balance-area high in the S&P 500.

What Does It Mean: In Tuesday’s regular trading, initiative buyers dominated the auction, after a break of the low-volume node at $3,580. Later in the session, buyers established an excess high, suggesting an end to the upside discovery process.

Overnight, however, buyers extended their gains before finding responsive sellers near the $3,650 mark, a balance-area projection.

As a result, participants come into Wednesday’s session knowing that (1) the market has made a substantial advance, (2) numerous high-profile economic releases are to be revealed, (3) the prior day’s p-shaped profile structure is weak and indicative of short-covering.

Therefore, today’s session may confirm if yesterday’s activity was the start of a new trend to the upside. Auctioning into Tuesday’s profile structure, below $3,625, may portend a rapid liquidation down to the $3,610 high-volume node, which ought to offer responsive buyers an opportunity to buy at lower prices and initiative sellers a favorable area to profit take. Spending time below yesterday’s value points to further balance.

In case participants accept higher prices, upside targets include the overnight high, as well as the November rally high at $3,668.75. An initiative drive through $3,610 would be the most bearish outcome, and would target the balance-area low and then the low-volume node at $3,580.

Levels Of Interest: $3,610 high-volume node, $3,655 overnight high, $3,668.75 rally high.

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Commentary

Market Commentary For 11/24/2020

What Happened: Alongside preparations to nominate former Fed chair Janet Yellen for Treasury secretary, as well as hopes for an economic recovery on COVID-19 coronavirus vaccines, U.S. index futures added to Monday’s v-shape recovery.

What Does It Mean: After a failure to accept Friday’s late-day spike, participants established an excess-low near the micro-composite high-volume node, the fairest price to do business in prior trade. Since then, initiative buyers broke the three-day balance-area high and drove through the low-volume node at $3,580. The subsequent activity found acceptance in the 11/18 profile, suggesting a change in near-term directional conviction.

As a result, participants come into Tuesday’s day session knowing that the market has made a substantial advance, gapping up to the $3,610 high-volume concentration which denotes value and supply.

Higher prices should allow responsive sellers a favorable opportunity to sell and initiative buyers a favorable area to take profit. An initiative drive through this area would be the most bullish outcome, and would target first the $3,630 balance-area high, and then the November rally high.

Levels Of Interest: $3,580 low-volume node, $3,610 high-volume node, $3,630 balance-area high, $3,668.75 rally high.

Bonus Graphics: There is more than meets the eye.

Graphic by Goldman Sachs, from The Market Ear; sentiment stretched, risk is moderate.
Graphic by CNN, from The Market Ear; “Markets do not crash on fear.”
Ready for the Santa rally - but first some Thanksgiving
Graphic by Goldman Sachs, from The Market Ear; bears have seasonality to fight.
Graphic by Deutsche Bank, from The Market Ear; “soon we have no shorts left.”
Graphic by Spotgamma, from The Market Ear; SPX $3,600 to be sticky.
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Commentary

Market Commentary For 11/23/2020

What Happened: Alongside hopes for an economic recovery on COVID-19 coronavirus vaccines, U.S. index futures negated Friday’s late-day spike liquidation, gapping higher into Monday’s open.

What Does It Mean: On Friday’s end-of-day sell-off away from value, the S&P 500 closed within a prior balance area marked by the $3,580 low-volume node and $3,506.25 excess low (see below graphic). Since then, the weekend session negated the spike liquidation, suggesting initiative sellers may be losing control.

As a result, if participants can auction and spend time above the $3,580 low-volume node, then the potential exists for a failed breakdown and range-expansion up to the balance-area high near $3,630. Otherwise, if participants manage to retake the prior selling activity marked by the $3,562 spike base, then that action may be the start of a new trend to the downside, confirmed by range expansion beyond the $3,506.25 excess low.

Pictured: Profile overlay on a candlestick chart of the Micro E-mini S&P 500 Futures

Levels Of Interest: Spike base at $3,562, the $3,506.25 excess low, as well as the $3,580 low-volume node.

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Commentary

‘Tug Of War’: Market Commentary For The Week Ahead

Key Takeaways:

  • Sentiment still stretched despite cooling after the vaccine value rotation on news of further lockdowns, which could have a material consequence on the economic recovery.
  • The pandemic-induced liquidation of businesses not equipped to survive disruption and the accelerated adoption of new technology suggests growth stocks have staying power.
  • Broad-market equity indices ended in a larger balance area suggesting further acceptance of the positive response to upside earnings surprises, a divided government, and vaccine results. 
  • Friday’s monthly options expiry may mark a decisive move depending on how existing derivatives exposure is rolled forward and the presence of impactful news.
  • Institutions differ in opinion over the market’s strength into year-end.

What Happened: Following the post-election rally, U.S. index futures remained range-bound as sentiment cooled in the face of new lockdowns and fading stimulus hopes.

What Does It Mean: After Monday’s initiative upside drive on news that another COVID-19 coronavirus vaccine developed by Moderna Inc (NASDAQ: MRNA) was 94.5% effective at preventing cases of the virus, U.S. index futures pared their advance, as participants struggled to maintain higher prices, evidenced by a divergent delta (i.e., the non-presence of committed buying) and mechanical trade (i.e., low-excess at the edges of balance).

Pictured: Profile overlays on a candlestick chart of the Micro E-mini S&P 500 Futures.

What To Expect: On Friday’s end-of-day sell-off away from value, the S&P 500 closed within a prior balance area marked by the $3,580 spike base and $3,506.25 excess low. 

Given that Friday’s session failed to retake Wednesday’s spike liquidation, auctioning back into the micro-composite high-volume node at $3,557, the fairest price to do business during the prior week’s balancing activity, initiative sellers remain in control.

As a result, participants come into Monday’s session knowing the following:

  1. Prior end-of-day spikes were the result of weak-handed, short-term buyers liquidating in panic.
  2. The selling did not attract increased participation (i.e., price diverged from value).
  3. Friday’s monthly options expiry may mark a decisive move depending on how existing contracts are rolled forward. Given that $3,600 is the highest gamma strike, the probability of sustained directional resolve, absent material news, is much lower.
Graphic by SpotGamma.com.

Therefore, in light of a weak response to the $3,557 high-volume node and Friday’s options expiry, participants can carry forward the following frameworks for next week’s trade. 

If participants manage to spend time and build value in or below the prior selling activity, then initiative sellers remain in control and the liquidation could be the beginning of a new trend to the downside, confirmed by range expansion beyond the $3,506.25 excess low. Otherwise, there is the potential for a failed break-down in which participants manage to rotate back over the $3,580, a balance area boundary. 

Conclusion: Friday’s monthly options expiry may mark the beginning of a decisive move. The only thing that’s needed? A catalyst. 

In case of sustained upside, Goldman Sachs Group Inc (NYSE: GS) gives the S&P a $3,700 target on an expectation the v-shape recovery will continue into next year. Contributing factors including a divided government, vaccine administration, rebound in profits, low rates, and a small rise in the yield curve. 

Graphic by Goldman Sachs, retrieved from The Market Ear.com

In case of further balance or selling, JPMorgan Chase & Co (NYSE: JPM) sees vulnerabilities as mutual funds look to sell $160 billion in global equities to revert to their target 60:40 allocation.

Levels Of Interest: Micro-composite HVN at $3,557, the $3,506.25 excess low, as well as the $3,580 balance-area low.

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Commentary

Market Commentary For 11/20/2020

What Happened: Alongside fading stimulus hopes, U.S. index futures remained range bound ahead of Friday’s monthly options expiry, suggesting further acceptance of Wednesday’s spike liquidation.

What Does It Mean: After Thursday’s test of the micro-composite high-volume node at $3,557, the fairest price to do business during last week’s balancing activity, responsive buyers emerged, pushing prices back into Wednesday’s spike liquidation.

Further, the aforementioned liquidation came after participants struggled to maintain higher prices for numerous sessions prior, evidenced by the divergent delta (i.e., non-presence of committed buying) and low-excess at the edges of balance.

As a result, because much of this week’s activity was mechanical, participants come into today’s session knowing that (1) Wednesday’s end-of-day spike was the result of weak-handed, short-term buyers liquidating in panic, (2) the selling did not attract increased participation (i.e., price diverged from value), and (3) Friday’s monthly options expiry could mark a decisive move depending on how existing contracts are rolled forward.

Therefore, in light of Thursday’s response to the $3,557 high-volume node and Friday’s options expiry, participants can carry forward the prior day’s framework for trade.

If participants manage to spend time and build value in or below the prior day’s selling activity, then initiative sellers remain in control and the liquidation could be the beginning of a new trend to the downside, confirmed by range expansion beyond the $3,506.25 excess low. Otherwise, there is the potential for a failed break-down in which participants manage to rotate back over $3,585, the lower boundary of the upper-balance area.

Levels Of Interest: Micro-composite HVN at $3,557, the $3,506.25 excess low, as well as the $3,585 balance-area low.