Categories
Commentary

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)

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.

Categories
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.

Categories
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.

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.

Categories
Commentary

Daily Brief For April 30, 2021

Market Commentary

Index futures in balance.

  • Fundamentals great, risks nearing.
  • Earnings, FOMC pass. What now?
  • May see chop or responsive trade.

What Happened: U.S. stock index futures auctioned lower overnight after a string of positive fundamental developments.

Graphic updated 6:20 AM EST.

What To Expect: Friday’s regular session (9:30 AM – 4:00 PM EST) 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 initiative trade below the $4,186.75 ledge (also the balance-area high, or BAH). This is significant because it suggests participants did not have the conviction to explore higher prices beyond balance (a dynamic that’s caused by participants searching for more information to base their next move). 

Ledges: Flattened area on the profile which suggests responsive participants are in control, or initiative participants lack the confidence to continue the discovery process. The ledge will either hold and force participants to liquidate (cover) their positions, or crack and offer support (resistance).

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).

As stated in yesterday’s balance-break and gap scenarios, acceptance was key in confirming the higher prices discovered during Thursday’s pre-market trade. Participants failed to find acceptance given the S&P 500’s move into the prior range. As a result, odds favor (1) sideways or (2) lower trade, as low as the balance-area low (BAL) $4,110.50 (a minimal excess low, also). 

All of these nuances — while prices are near all-time highs — are happening in the context of optimistic comments from policy leadership and blow-out earnings.

“All evidence still points to continued support from both fiscal and monetary policy against a backdrop of accelerating corporate earnings,” said Mark Haefele, UBS Global Wealth Management’s chief investment officer. “This reinforces our view that markets can advance further, with cyclical parts of the market — such as financials, energy, and value stocks — likely to benefit most from the global upswing.”

To put it simply, one could say that the equity market is priced to perfection at this stage of the recovery.

For today, participants can trade from the following frameworks. 

In the best case, the S&P 500 trades sideways or higher; activity above the $4,186.75 ledge targets the $4,210.75 minimal-excess high. Initiative trade beyond $4,210.75 could reach as high as $4,228.00 and $4,263.00. In the worst case, the S&P 500 trades lower; activity below the $4,168.00 RTH low targets the $4,164.25 high-volume area (HVNode). Thereafter, if lower, participants could see a test of the opposing end of the balance, or 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.

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: S&P 500 Index (top left), Nasdaq 100 (top right), Russell 2000 (bottom left), and Dow Jones Industrial Average (bottom right). Updated 9:30 PM EST.
Graphic: 65-minute profile chart of the Micro E-mini S&P 500 Futures. Updated 9:30 PM EST.
Graphic: Physik Invest maps out the purchase of call and put options in the SPDR S&P 500 ETF Trust (NYSE: SPY), for April 29. Activity in the options market was primarily concentrated in short-dated tenors, in strikes as low as $400.00, which corresponds with $4,200.00 in the cash-settled S&P 500 Index (INDEX: SPX).
Graphic: Noting a move lower in the % of S&P 500 companies trading above their 100-day simple moving average.

News And Analysis

Economy | U.S. recovery gains steam as spending fuels 6.4% GDP growth. (BBG)

Commodities | Surging U.S. crop prices reversing fortunes in rural Iowa. (REU)

Commodities | Cobalt price jump underscores reliance on metal for EV batteries. (FT)

Trade | Why Apple has chips for iPhones while Ford got caught short. (REU)

Markets | Fundamentals support lower volatility, tight corporate bond spreads. (Moody’s)

Economy | China’s factory activity growth slows on supply bottlenecks, demand. (REU)

Housing | Pending home sales rise less than expected, inventory remains tight. (MND)

Economy | Sawmills are selling boards faster than they can cut them. (FP)

Trade | Caterpillar flags supply-chain risks as global recovery boost earnings. (REU)

Commodities | Oil dipping after rallying on signs of rising global fuel demand. (BBG)

Economy | Joe Biden says tax hikes on rich will fund cuts for many more. (BBG)

Economy | How a bout of mild inflation could knock decarbonization plans. (FP)

Economy | The recovery accelerates amid consumer, housing, industrial gains. (S&P)

Markets | Lockdowns worsen India’s fiscal woes fueled by weak auctions. (BBG)

Recovery | COVID-19 surge in Oregon shows fight against virus not over. (BBG)

What People Are Saying

Innovation And Emerging Trends

Events | Discover tomorrow’s solutions to today’s challenges in fintech. (Finovate)

Trading | Nasdaq does a deep dive into dark, off-exchange trading. (NDAQ)

 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.

Categories
Commentary

Daily Brief For April 28, 2021

Market Commentary

Index futures balance, trade sideways.

  • Traders honed in on a Fed taper.
  • A heavy day of earnings, FOMC.
  • Expect chop or responsive trade. 

What Happened: Ahead of key economic developments, U.S. stock index futures auctioned sideways-to-lower overnight. Yields and the dollar rose.

This activity comes alongside reports of strong earnings from heavily weighted index constituents. Alphabet Inc (NASDAQ: GOOGL), Microsoft Corporation (NASDAQ: MSFT), and Pinterest (NYSE: PINS) were some of the most anticipated reports.

Today, Joe Biden will unveil his “American Families Plan” in an address to Congress, the Federal Reserve will provide clarity on its monetary easing plan, and Apple Inc (NASDAQ: AAPL), among others, will report their earnings.

Graphic updated at 8:20 AM EST.

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

Adding, over the past few sessions, volumes have dwindled and responsive trade has been the course of action. This is in anticipation of impactful fundamental developments, like the FOMC meeting, today.

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

Goldman Sachs Group Inc (NYSE: GS) expects the Fed to keep rate hikes off the table until mid-2023. Given that labor slack remains high, the odds of tapering are rather slim.
Graphic: Goldman Sachs’ timeline for Federal Reserve tapering, via ForexLive.

That said, today’s trade will likely be volatile and participants can trade from the following frameworks. 

In the best case, the S&P 500 trades sideways or higher; activity above the $4,186.75 ledge targets the $4,191.75 overnight high (ONH). Initiative trade beyond the ONH may introduce excess and could reach as high as the Fibonacci-derived price targets, $4,197.25-$4,263.00. 

Ledges: Flattened area on the profile which suggests responsive participants are in control, or initiative participants lack the confidence to continue the discovery process. The ledge will either hold and force participants to liquidate (cover) their positions, or crack and offer support (resistance).

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

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.

In the worst case, the S&P 500 trades lower; activity below $4,166.75 regular-trade low (RTH Low) targets the $4,164.25 high-volume area (HVNode). Thereafter, if lower, participants can look for responses at the $4,163.25, $4,137.25, and $4,122.75 HVNodes.

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.

As long as prices remain within the prior day’s range, responsive trade is the course of action. Participants should approach today’s session with extra caution, given the potential for headline-driven initiative activity. Big picture, though, the bullish narrative remains intact unless the S&P 500 is able to auction and spend time below the $4,110.50 minimal excess low (also the balance-area low). 

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

Balance (Two-Timeframe Or Bracket): Rotational trade that denotes current prices offer favorable entry and exit. Balance-areas make it easy to spot change in the market (i.e., the transition from two-time frame trade, or balance, to one-time frame trade, or trend).
Graphic: 4-hour profile chart of the Micro E-mini S&P 500 Futures.
Graphic: SHIFT search maps out the trade of call and put options in the SPDR S&P 500 ETF Trust (NYSE: SPY), for April 27. Activity in the options market was primarily concentrated in short-dated tenors, in strikes near current prices. Data suggests participants, in insignificant amounts, added call-side exposure into the beginning of May. Sentiment flips into the end of May, beginning of June. 

News And Analysis

Economy | Biden unveils a massive family aid plan funded by taxing the rich. (BBG)

Economy | Fed to stay patient as U.S. outlook improves: decision-day guide. (BBG)

Commodities | Goldman sees commodities rallying over the next six months. (FP)

Markets | Tesla accused by EPA of auto-coating emissions reporting failure. (BBG)

Markets | Airbus unit has pleaded guilty to corruption over Saudi contracts. (BBG)

Commodities | OPEC+ is sticking to plan to ease oil output cuts from May 1. (REU)

Markets | Local banks, like their giant rivals, are finding loan growth elusive. (BBG)

Markets | Turning tide signals ebbing of liquidity ocean, analysis suggests. (REU)

What People Are Saying

Innovation And Emerging Trends

Markets | Chatting with Cathie Wood, the CEO, and CIO at ARK Invest. (MM)

FinTech | Trader-inspired brokerage Edge Clear launches new platform. (BZ)

FinTech | Barclays taps amount over end-to-end digital banking solutions. (BZ)

Financing | IRR in emerging tech hubs starting to overtake Silicon Valley. (TC)

FinTech | ICE introduces ultra-low-latency wireless services in Europe. (MM)

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.

Categories
Commentary

Daily Brief For April 27, 2021

Market Commentary

Index futures auction sideways, validating higher prices.

  • 80% of companies beat expectations.
  • Ahead: FOMC, Biden Address, GDP.
  • Indices balance and correct with time.

What Happened: U.S. stock index futures auctioned sideways, overnight, while Treasury yields and commodities posted substantive gains.

This price action comes as nearly 80% of companies that reported their earnings have either met or beaten expectations. The muted response suggests much the optimism has already been priced in. Now, participants are looking for more information to base their next move. 

See here for information on how to read an earnings report.

Ahead, is data on home prices, consumer confidence, and manufacturing. On Wednesday, Federal Reserve Chair Jerome Powell will hold a conference on central bank policy. On the same day, Joe Biden will address Congress. Thursday, U.S. GDP will likely show improvement in the first quarter, 2021.

Graphic updated 8:30 AM EST.

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

Adding, during the prior day’s regular trade, the best case outcome occurred, evidenced by sideways trade just shy of the $4,186.75 balance-area high. 

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

All this comes after a substantial advance. The S&P 500 is up nearly 13% since the start of March and it could be said that the product has been marked up, enough. Given the busy calendar, the odds favor sideways trade. The reason being: a market in balance tends to stay in balance unless some exogenous factor provides participants more information to base their next move.

Adding, Jeff Buchbinder, Equity Strategist for LPL Financial says: “[W]hile sentiment may be overly optimistic and a pickup in volatility would be totally normal, strong breadth measures suggest stocks still may have more upside. This week we tackle that same topic of peak optimism, but by looking at some valuation metrics. While valuations are elevated, they still appear reasonable when factoring in interest rates and inflation.”

Moving on, for today, participants can trade from the following frameworks. 

In the best case, the S&P 500 trades sideways or higher; activity above the $4,186.75 ledge targets the $4,191.75 overnight high (ONH). Initiative trade beyond the ONH may introduce excess and could reach as high as the Fibonacci-derived price targets, $4,197.25-$4,263.00. 

In the worst case, the S&P 500 trades lower; activity below $4,173.25 regular-trade low (RTH Low) targets the $4,164.25 high-volume area (HVNode). Thereafter, if lower, participants can look for responses at the $4,163.25, $4,137.25, and $4,122.75 HVNodes.

Ledges: Flattened area on the profile which suggests responsive participants are in control, or initiative participants lack the confidence to continue the discovery process. The ledge will either hold and force participants to liquidate (cover) their positions, or crack and offer support (resistance).

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

Initiative Trade: Buying (selling) within or above (below 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.

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.

As long as the S&P 500 remains in the $4,186.75-$4,110.50 balance area, the course of action is responsive trade.

Graphic: 65-minute profile chart of the Micro E-mini S&P 500 Futures.
Graphic: SHIFT search maps out the trade of call and put options in the SPDR S&P 500 ETF Trust (NYSE: SPY), for April 26. Activity in the options market was primarily concentrated in short-dated tenors, in strikes near current prices. To put it simply, not much is going on, yet.

News And Analysis

Banking | Nomura, UBS take global banks’ Archegos hit to $10B. (BBG)

Economy | U.S. auto dealers are winners as chip shortage lifts profit. (REU)

Markets | Goldman Sachs watching total margin loans after blow-ups. (REU)

M&A | New York Community Bancorp will buy Flagstar Bancorp. (REU)

Economy | France, and Germany support U.S. 21% corporate tax plan. (BBG)

Travel | The E.U. set to let vaccinated U.S. tourists visit this summer. (NYT)

What People Are Saying

Innovation And Emerging Trends

FinTech | Citi eyes mortgage tech in push to close the wealth gap. (BBG)

Innovation | Germany to spend recovery money on green, digital goals. (REU)

FinTech | Mobile bank Current raises $220M Series D, tripling value. (TC)

FinTech | S!NG wants creators to lean on NFTs to protect their IP. (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, 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.

Categories
Commentary

Daily Brief For April 26, 2021

Market Commentary

Index futures base. Position for directional resolve. 

  • Earnings, FOMC, and more.
  • Indices base, correct by time.

What Happened: U.S. stock index futures traded sideways overnight ahead of impactful developments such as the corporate earnings, FOMC meeting, and economic data.

Key takeaway: ”We had argued for a likely breakout in bond yields, and continue to believe that equities will be able to tolerate this repricing, as growth-policy trade-off remains supportive,” JPMorgan Chase & Co. (NYSE: JPM) strategists Mislav Matejka, Prabhav Bhadani, and Nitya Saldanha said. “The phase of activity pick-up is ahead of us. At the same time, excess liquidity is likely to stay ample, as policymakers err on the side of caution.”

Graphic updated 7:50 AM EST.

What To Expect: Monday’s regular session in the S&P 500 (9:30 AM – 4:00 PM EST) 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 that recovered Thursday’s news-driven liquidation. Adding, the liquidation failed to take out the $4,110.50 minimal excess low. Given those nuances, odds favor (1) a correction through time (i.e., balance), rather than price, or (2) higher prices. 

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

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.

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

For today, participants can trade from the following frameworks. 

In the best case, the S&P 500 trades sideways or higher; activity above the $4,186.75 balance-area high targets the remaining Fibonacci price targets at and above $4,200.00. 

In the worst case, the S&P 500 trades lower; activity below the $4,164.50 high-volume area (HVNode) targets the $4,153.25 HVNode. Thereafter, if lower, participants can look for responses at the $4,137.00 and $4,123.00 HVNodes. 

A break of the $4,110.50 minimal excess low suggests an inclination by participants to revert to the mean and repair some of the poor structure left behind prior discovery.

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: 4-hour profile chart of the Micro E-mini S&P 500 Futures.
Graphic: 1-day candlestick chart of the cash-settled S&P 500 Index (INDEX: SPX).
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 April 23. Activity in the options market was primarily concentrated in short-dated tenors, in strikes as low as $381.00, which corresponds with $3,810.00 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 cash-settled S&P 500 Index (INDEX: SPX).
Graphic: SPDR S&P 500 ETF Trust (NYSE: SPY) market liquidity, via Bookmap. Note the divergent volume delta, a measure of buying and selling power as calculated by the difference in volume traded at the bid and offer. Such conditions favor balance (two-timeframe, rotational, or bracket trade).

News And Analysis

Economy | The Fed’s next test is breaking the ice over policy shift. (WSJ)

Politics | U.K. denies Boris Johnson said “let the bodies pile high.” (REU)

Economy | A disconnect between home sales, prices, and rates. (MND)

Economy | German government has raised 2021 growth forecast. (REU)

Economy | The grocery price shock is coming to a store near you. (BBG)

Economy | APAC growth outlooks diverge amid COVID recovery. (Fitch)

What People Are Saying

Innovation And Emerging Trends

Markets | Beijing to crack down on home buying in a famous district. (BBG)

FinTech | Ant Group reveals crypto partnership history with the PBOC. (SCMP)

FinTech | It is a dangerous time to get caught up in the fintech frenzy. (FT)

Recovery | ‘We are drowning in insecurity’: young people after COVID. (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, 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.

Categories
Commentary

Daily Brief For April 23, 2021

Market Commentary

Index futures base. Position for directional resolve.

  • Tax hike news causes a liquidation.
  • Home sales. Biden climate summit.
  • Indices are correcting through time.

What Happened: U.S. stock index futures auctioned sideways, overnight, after liquidating alongside reports that President Biden wants to nearly double the capital gains tax paid by top earners.

Liquidation Breaks: The profile shape suggests participants were “too” long and had poor location. The news event helped resolve this dynamic.
Updated: 8:45 AM EST

What To Expect: Friday’s regular session in the S&P 500 (9:30 AM – 4:00 PM EST) 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 failed to occur. 

In the interest of objectivity, despite the $4,117.75 regular trade low (RTH Low) being taken out, responsive buyers stepped in aggressively, causing the S&P 500 to halt short of the $4,110.50 poor, minimal excess low. This action is noteworthy — had the poor low been taken out, conditions would have been markedly different. Instead, given technical nuances, it is obvious the market is correcting in time (i.e., balancing), rather than price.

Responsive Buying: Buying in response to prices below area of recent price acceptance.

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.

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

Simply put, markets are basing, pricing in new information, ahead of any directional resolve.

Important to add into the narrative, too, are historical responses to capital gains tax increases.

Bloomberg’s John Authers notes: “The way the market handled the last major CGT increase, at the end of 2012, is instructive. As it grew clear that higher capital gains taxes were coming, the S&P 500 languished and went sideways for the last few months of the year, closing roughly where it had been in March. Then 2013 turned out to be a great year; stocks started their rally at the beginning of January and never really stopped.”

Graphic: Bloomberg unpacks implications of a capital gains tax hike. 

“Stocks do indeed tend to fall in the run-up to the change, but more than make up for it thereafter. Earnings multiples increased slightly before those rises, but did better in the six months afterwards. And households sold a little before the hikes, but more than made up for it.”

The highest returning, momentum stocks, however, stand to lose the most. Given that “[m]omentum stocks have had something of a correction in recent months, … it is unlikely that the tax change will have a major effect on them.”

For today, moreover, participants can trade from the following frameworks. 

In the best case, the S&P 500 trades sideways or higher; activity above the $4,137.25 high-volume area (HVNode) targets the $4,162.50 VPOC. Initiative trade beyond the VPOC could reach as high as the $4,183.50 regular trade high (RTH High). In the worst case, the S&P 500 trades lower; activity below $4,115.25 targets the $4,110.50 poor, minimal excess low. 

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.

Initiative Buying: Buying within or above the previous day’s value area.

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.

Thereafter, if lower, participants can look for responses at (1) the $4,093.00 VPOC, (2) $4,082.75 HVNode, and (3) the $4,069.25 HVNode.

Graphic: 4-hour 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 April 22. Activity in the options market was primarily concentrated in short-dated tenors, in strikes as low as $400.00, which corresponds with $4,000.00 in the cash-settled S&P 500 Index (INDEX: SPX).
Graphic: Increase in put-side interest on the cash-settled S&P 500 Index (INDEX: SPX). Such activity suggests participants are interested in hedging their downside. Visual via SHIFT.
Graphic: Price and volume delta, or buying and selling power as calculated by the difference in volume traded at the bid and offer, diverge into the close in the SPDR S&P 500 ETF Trust (NYSE: SPY).

News And Analysis

Economy | Senate Republicans rolled out a $568B infrastructure proposal. (Axios)

Economy | The Fed’s monthly bond purchases endure as goals fall short. (S&P)

Wellness | Studies show the coronavirus can kill months after infection. (BBG)

Economy | EU economy ‘on crutches,’ warns ECB chief Christine Lagarde. (DW)

Markets | High-yield corporate bond issuance, prospects for a recovery. (Moody’s)

Politics | Russia is planning to end a massive troop buildup near Ukraine. (Axios)

Economy | $12.3T in stimulus killed off the U.S. credit default cycle. (BBG)

Banking | Two blowups have Credit Suisse paying the price for riskiness. (BBG)

Economy | March mortgage delinquency drop exaggerated by events. (MND)

Markets | Mortgage rates improve on 7-week lows, bond market stable. (MND)

Markets | GS: Congress is likely to cap Biden’s CGT hike at around 28%. (MI)

Markets | Scale of T-Bill drought hinges on Biden rescue, income-tax haul. (BBG)

What People Are Saying

Innovation And Emerging Trends

Transportation | Newer planes providing airlines trove of useful data. (NYT)

FinTech | Public.com app connects users with public company leaders. (BZ)

FinTech | From breakthroughs to copycats, here’s what to consider. (Fortune)

FinTech | Signal Advisors adds Series A for financial advising tech. (BZ)

Education | MasterClass co-founder secures funding for new ed-tech. (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.

Categories
Commentary

Daily Brief For April 22, 2021

Market Commentary

Index futures resolve directionally, yesterday. Base overnight.

  • Growth warning, economic data.
  • ECB decision, claims, and more.
  • Sellers have trouble dominating.

What Happened: U.S. stock index futures broke their downtrend, yesterday, and auctioned sideways overnight, ahead of announcements by the European Central Bank, data on initial claims, home sales, and manufacturing, as well as earnings releases.

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 initiative trade above the $4,155.00 high volume area (HVNode). This is significant due to the fact that the downtrend broke after participants lacked the conviction to move prices lower, evidenced via a poor, minimal excess low. 

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.

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.

Short-term sellers, simply put, piled on at the low and weren’t paid quickly for their risk. This inventory was resolved during Wednesday’s trend-day higher. 

Looking beyond the equity indices, breadth is pegged at its high. In the U.S., according to The Market Ear, the percent of stocks above their 200-day moving average hit 96%, the highest since 2009. Typically, after such instances, one- to three-month returns are positive.

Beyond big-picture narratives, for today, participants can trade from the following frameworks. 

In the best case, the S&P 500 trades sideways or higher; activity above the $4,153.50 spike base targets the point of control (POC) near $4,171.00. Initiative trade beyond the POC could reach as high as (1) the $4,183.00 regular trade high (RTH High) and (2) Fibonacci-derived price targets near $4,187.00-$4,197.25.

In the worst case, the S&P 500 trades sideways or lower; activity below the $4,117.75 regular trade low targets first the $4,110.50 poor, minimal excess low. Thereafter, if lower, participants can look for responses at (1) the $4,093.00 VPOC, (2) $4,082.75 HVNode, and (3) the $4069.25 HVNode. 

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).

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: 4-hour 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 April 21. Activity in the options market was primarily concentrated in short-dated tenors, in strikes as high as $422, which corresponds with $4,220.00 in the cash-settled S&P 500 Index (INDEX: SPX).
Graphic: Noticeable increase in call-side interest on the cash-settled Nasdaq-100 Index (INDEX: NDX), expiring 4/28. Such activity suggests (1) an expectation, by participants, of a rotation back into technology, or (2) a hedge against earnings surprises, and the like. Visual via SHIFT.
Graphic: Market liquidity in the Invesco QQQ Trust (NASDAQ: QQQ), one of the largest ETFs that track Nasdaq-100 prices, supports price rise.

News And Analysis

Economy | U.S. jobless claims plunged last week to a pandemic low. (BBG)

Politics | President Biden plans to cut U.S. greenhouse gas emissions. (BBG)

Markets | Credit Suisse Group raises $2B as CEO cuts hedge fund unit. (BBG)

Markets | Southwest Airlines bookings improve, will likely break even. (CNBC)

Economy | Should investors worry about a Chinese Lehman-style crisis? (BBG)

Markets | Bank of Canada signals rake hike, tapers bond purchases. (REU)

Economy | Fiscal stimulus, improving employment supports bank assets. (Moody’s)

Economy | Mortgage applications broke a six-week slump, last week. (SOURCE)

Economy | U.S. economy on a solid footing, the virus still a top threat. (REU)

What People Are Saying

Innovation And Emerging Trends

FinTech | Nasdaq democratizes information, fuels on-demand finance trend. (BZ)

Startups | Investors, executives, and founders discuss Zagreb’s startup potential. (TC)

FinTech | Why VCs are investing in non-fungible token (NFT) marketplaces? (CBN)

Investing | How can you build a robust portfolio that outperforms for a century? (BBG)

 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.