Daily Brief For November 5, 2021


Equity index futures higher. Commodities were higher. Bonds mixed. Volatility compressed.

Ahead is a heavier day of economic releases, in the face of fundamental narratives and positioning metrics that may support intraday price stability.

What Happened

Overnight, equity index futures were marked up ahead of the House’s plan to vote on President Joe Biden’s economic package and infrastructure, as well as October jobs data.

Also, in the news, there were narratives surrounding China’s dollar surplus, a pandemic resurgence in Europe, Pfizer Inc’s (NYSE: PFE) development of a pill for COVID-19.

Ahead is data on payrolls, unemployment, and average hourly earnings (8:30 AM ET), as well as consumer credit (3:00 PM ET). I apologize as this is what I listed yesterday, mistakenly.

Graphic updated 6:30 AM ET. Sentiment Risk-On if expected /ES open is above the prior day’s range. /ES levels are derived from the profile graphic at the bottom of the following section. Levels may have changed since initially quoted; click here for the latest levels. SqueezeMetrics Dark Pool Index (DIX) and Gamma (GEX) calculations are based on where the prior day’s reading falls with respect to the MAX and MIN of all occurrences available. A higher DIX is bullish. At the same time, the lower the GEX, the more (expected) volatility. Learn the implications of volatility, direction, and moneyness. SHIFT data used for S&P 500 (INDEX: SPX) options activity. Note that options flow is sorted by the call premium spent; if more positive then more was spent on call options. Breadth reflects a reading of the prior day’s NYSE Advance/Decline indicator. VIX reflects a current reading of the CBOE Volatility Index (INDEX: VIX) from 0-100.

What To Expect

On weak intraday breadth and lackluster market liquidity metrics, the best case outcome occurred, evidenced by balanced trade at newly discovered S&P 500 prices.

As also evidenced by the separation of value, overnight, the gap out of yesterday’s range marks a potential willingness to continue the uptrend.

To note, poor structure left behind prior initiative trade adds to technical instability, a dynamic mentioned in prior commentaries. Participants will likely look to check old value (i.e., revisit, repair, and strengthen) pockets of low-volume, feverishly, on any breakdown of trend.

Graphic: Flat delta (i.e., non-committed buying/selling as measured by volume delta or buying and selling power as calculated by the difference in volume traded at the bid and offer) in SPDR S&P 500 ETF Trust (NYSE: SPY), via Bookmap. The readings are supportive of responsive trade (i.e., rotational trade that suggests current prices offered favorable entry and exit).

Context: The aforementioned trade is happening in the context of a slowdown in economic growth, increased clarity on the Federal Reserve’s (Fed) intent to moderate stimulus, as well as the prospects of renewed fiscal support.

The implications of these narratives on price are contradictory.

To elaborate, supply chain disruptions slowed the pace of economic growth, while participants saw both the Fed’s decision to taper and keep rates unchanged, as well as the potential passage of President Biden’s economic plan, today, as near-term positives.

In terms of positioning, the CBOE Volatility Index (INDEX: VIX) was lower, while supply came in across the VIX futures term structure. That, alongside the long-gamma environment and increased demand for options above current prices (i.e., bets on the upside), points to increased odds of near-term equity market stability.

To quote options analysis and data provider SpotGamma, “​​the term structure of IV (this is how high the IV is for longer-dated options) remains elevated. That suggests near term options could have more ‘bleed’ which could keep the SPX market price tailwind intact.”

Expectations: As of 6:30 AM ET, Friday’s regular session (9:30 AM – 4:00 PM ET), in the S&P 500, will likely open in the upper part of a positively skewed overnight inventory, outside of prior-range and -value, suggesting a potential for immediate directional opportunity.

Gap Scenarios: 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.

In the best case, the S&P 500 trades sideways or higher; activity above the $4,663.00 untested point of control (VPOC) puts in play the $4,684.25 overnight high (ONH). Initiative trade beyond the ONH could reach as high as the $4,705.25 and $4,725.50 Fibonacci, or higher.

In the worst case, the S&P 500 trades lower; activity below the $4,663.00 VPOC puts in play the $4,619.00 VPOC. Initiative trade beyond the VPOC could reach as low as the $4,590.00 balance boundary and $4,574.25 high volume area (HVNode), or lower.

Click here to load today’s updated key levels into the web-based TradingView charting platform. Note that all levels are derived using the 65-minute timeframe. New links are produced, daily.
Graphic: 65-minute profile chart of the Micro E-mini S&P 500 Futures. Learn about the profile.

Charts To Watch

Graphic: (NASDAQ: AMZN). (S~3403, R~3580). S is for support. R is for resistance. I am seeking to initiate short-duration call structures against the 3580 gap fill and prior all-time high. Will initiate for credit or finance with put structures.
Graphic: (NASDAQ: FB). (S~326.45, R~336.90). S is for support. R is for resistance. If the stock was to maintain prices above 336.90, there is a potential change in tone. In such a case, I’m targeting Fibonacci retracements with call structures financed with credits on the put side.
Graphic: (NASDAQ: GOOGL). (S~2900, R~3113). S is for support. R is for resistance. I’m targeting prices between 3000 and 3100 with call structures for low cost or credit.
Graphic: (NYSE: SHOP). (S~1482, R~1650). S is for support. R is for resistance. Potential break of trend, move to an all-time high.
Graphic: (NYSE: IWM). (S~234.53, R~241.96, 251.41). S is for support. R is for resistance. Russell 2000 breaks out of balance. In my opinion, upon acceptance, there are potential opportunities for long trades.

Other charts I’m watching include BABA (S~155.29), ZM (S~245.92), ARKK (S~120.15), PINS (S~42.06), Z (S~58.15), BBY (S~123.65), GOOS (S~40.91), CTSH (R~82.00), LYFT (S~44.41), TMUS (S~118.00), WDC (51.47). S is for support. R is for resistance. 

What People Are Saying


Cave-Fill Process: Widened the area deemed favorable to transact at by an increased share of participants. This is a good development.

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

Volume Areas: A structurally sound market will build on areas of high volume (HVNodes). Should the market trend for long periods of time, it will lack sound structure, identified as low volume areas (LVNodes). LVNodes denote directional conviction and ought to offer support on any test. 

If participants were to auction and find acceptance into areas of prior low volume (LVNodes), then future discovery ought to be volatile and quick as participants look to HVNodes for favorable entry or exit.

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

POCs: POCs are valuable as they denote areas where two-sided trade was most prevalent in a prior day session. Participants will respond to future tests of value as they offer favorable entry and exit.

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). 

Modus operandi is responsive trade (i.e., fade the edges), rather than initiative trade (i.e., play the break).

Value-Area Placement: Perception of value unchanged if value overlapping (i.e., inside day). Perception of value has changed if value not overlapping (i.e., outside day). Delay trade in the former case.


After years of self-education, strategy development, and trial-and-error, Renato Leonard Capelj began trading full-time and founded Physik Invest to detail his methods, research, and performance in the markets.

Additionally, Capelj is a Benzinga finance and technology reporter interviewing the likes of Shark Tank’s Kevin O’Leary, JC2 Ventures’ John Chambers, and ARK Invest’s Catherine Wood, as well as a SpotGamma contributor, developing insights around impactful options market dynamics.


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.


‘Go Forth’: Market Commentary For The Week Ahead

Key Takeaways:

Last Week Unpacked: During much of the week, participants lacked the conviction to break through to new highs. This was evidenced by mechanical trade (i.e., low-excess at the edges of balance).

However, after Thursday’s liquidation on news that Pfizer Inc (NYSE: PFE) would slash its 2020 vaccine production target flushed out weak-handed participants, responsive buyers surfaced and recovered the balance-area high.

During Friday’s regular trading, initiative buyers extended range — through the $3,682.00 balance-area high — up to the $3,700.00 high gamma strike. The after-hours session introduced a 4-tick excess high, providing a clear end to the upside discovery process.

Pictured: Profile overlays on a 30-minute candlestick chart of the Micro E-mini S&P 500 Futures

What To Expect: Friday’s auction saw the separation and acceptance of value beyond a week-long balance-area.

This came after Thursday’s afternoon pullback found responsive buyers surface at a key technical level (i.e., the low-volume node near $3,655.00). The fact that there was a response at that technical reference confirms that participation in the market has been overwhelmingly short-term; in other words, institutions (e.g, funds) tend not to transact at exact technical levels.

Moreover, given that initiative buyers are in control, participants will come into Monday’s session in light of the following: 

  1. Both sentiment and positioning are historically stretched while the market is stuck in a long-gamma environment; in such cases, dealers hedge their derivatives exposure by selling into strength and buying into weakness. As a result, volatility is suppressed and the market pins or slowly rises in a range-bound fashion, as we’re seeing.
  2. JPMorgan Chase & Co. (NYSE: JPM) strategist Marko Kolanovic suggests equities will rally short-term, with the S&P 500 auctioning as high as $4,000 in Q1 2021 on the basis of improved fundamentals.
  3. Though prior trade points to the non-presence of committed buying, Friday’s session saw the separation and acceptance of value above a week-long balance area, further confirming the higher-time frame breakout.

Therefore, knowing that higher S&P 500 prices have been accepted, the following frameworks for next week’s trade apply.

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 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.

Conclusion: Though sentiment and positioning imply limited potential for further upside, the market remains in a strong technical uptrend bolstered by improved fundamental factors.

Overall, the S&P 500 has confirmed a multi-month balance-break.

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

Levels Of Interest: $3,710.00 projection, the micro-composite HVNode at $3,690.75 and $3,667.75, as well as the $3,682.00 and $3,640.00 balance boundary.

Photo by Abhishek Gaurav from Pexels.


Market Commentary For 12/4/2020

What Happened: After news that Pfizer Inc (NYSE: PFE) would slash its 2020 vaccine production target caused U.S. stock index futures to liquidate Thursday afternoon, prices have since recovered, suggesting the news was immaterial.

The S&P 500, in particular, remains in balance and range, further accepting Monday’s upside break.

What Does It Mean: During Thursday’s regular trading in the S&P 500, short-term participants were not able to muster the conviction to break through to new highs, as evidenced by a lack of value separation and excess.

Moreover, the afternoon long-liquidation on Pfizer news brought the S&P 500 back into an area that’s reflective of its most recent perception of value (i.e., HVNode). Responsive buyers surfaced on the news event, returning the market back to its highs after the lower prices offered favorable entry.

It’s important to note that the pullback halted at key technical level (i.e., LVNode near $3,655). This activity confirms that participation in the market is overwhelmingly short-term. Institutions do not transact at exact technical levels.

Further, the lack of excess at the high end of the 3-day balance area suggests the upside discovery process is likely not over. Adding to that, the market is stuck in a long-gamma environment; in such an environment, dealers hedge their exposure by selling into strength and buying into weakness. As a result, volatility is suppressed and the market pins or slowly rises in a range-bound fashion, as we’re seeing.

So, given that the market lacks breadth, technical forces (e.g., dealer hedging) will have a much greater impact on price action than most fundamental events, such as Thursday’s Pfizer news.

What To Expect: Going into today’s session, participants know that (1) the S&P 500 is trading within a three-day balance area above the $3,640 ledge, (2) technical forces take precedence over fundamentals, (3) and there is minimal excess at the highs. As a result, participants should default to trading responsively, unless either the all-time rally high ($3682.00) or low-volume ledge ($3,640) is broken.

Trading beyond either balance boundary may portend continued directional resolve. Breaking lower, participants should look for a response at the $3,630 high-volume area and $3,600 five-day balance boundary. Breaking higher, participants should look for continued upside as high as the $3,700 strike, the site of multiple price projections.

Levels Of Interest:  $3,682 and $3,640 balance area boundary.