Price Discovery Mode – One Time Frame Trade – Page 2

Market Commentary

Index futures attempting to initiate out of balance and explore higher prices.

Fed to taper before rate increase.
Watch claims and other releases.
The market rejected lower prices.

What Happened: U.S. stock index futures rose ahead of releases on key economic data and earnings reports.

What To Expect: Thursday’s regular session (9:30 AM – 4:00 PM EST) may 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 an intraday liquidation that found responsive buyers near the prior day’s pull-back low at $4,120.00.

As noted in the past few commentaries, U.S. equity index futures are best positioned for balance (i.e., sideways trade) or further upside into Friday’s monthly options expiration (OPEX). Afterward, all bets are off. The potential to correct into the poor structure left behind by the prior week’s price discovery increases dramatically. Spending any considerable amount below the high-volume area (HVNode) at $3,900.00 would change the near-term bullish tone.

Option Expiration (OPEX) Significance: Option expiries mark an end to pinning (i.e, the theory that market makers and institutions short options move stocks to the point where the greatest dollar value of contracts will expire worthless) and the reduction dealer gamma exposure.

More On Volume Areas: A structurally sound market will build on past areas of high-volume (HVNode). Should the market trend for long periods of time, it will lack sound structure (identified as a low-volume area (LVNode) 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 yesterday’s fairest price to do business, $4,137.00, targets the $4,143.75 regular-trade high (RTH High). Initiative trade beyond the RTH High could reach as high as the $4,152.00 and $4,162.75 price extensions. In the worst case, the S&P 500 trades lower; activity below the regular-trade low (RTH Low) at $4,113.00 targets the $4,104.00 spike base and $4,092.50 untested POC (VPOC).

More On 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 14, 2021. Activity in the options market was primarily concentrated in short-dated tenors, in strikes as low as $364, which corresponds with $3,640 in the cash-settled S&P 500 Index (INDEX: SPX).

Graphic: SHIFT search shows that trade in the SPDR S&P 500 ETF Trust (NYSE: SPY) lacks duration. This could be construed as the absence of directional commitment.

News And Analysis

Markets | Wall Street banks pivot from pandemic to boom times. (Axios)

Markets | Chinese fund jumps 258% after ditching Dalio playbook. (BBG)

Economy | Consumer, main street demand for loans is lacking. (REU)

Economy | Freddie Mac sees rates and prices leveling off into 2022. (MND)

Economy | Biden infrastructure plan to boost growth, employment. (Moody’s)

Economy | U.S. economy gaining momentum, consumers confident. (REU)

Economy | U.S. import prices increase solidly, boosting inflation. (REU)

Politics | Biden to hit Putin with Russia sanctions after summit offer. (BBG)

Markets | BlackRock assets hit $9T on stimulus, vaccine hopes. (BBG)

Markets | Cathie Wood’s ARK buys into Coinbase, sells some Tesla. (REU)

Markets | VanEck launches new digital asset-focused ETF on Nasdaq. (TB)

What People Are Saying

The best possible way to explain NFTs 👇 pic.twitter.com/0TVQRwCuiX
— Nik Sharma (@mrsharma) April 13, 2021

https://twitter.com/CycleWacher/status/1382315395135197186?s=20

1/ The first 18 months of a startup:

After starting my 2nd company in 2019, I decided I would write down useful lessons I learned or re-learned along the way. Some were hard-earned & others required steady focus. A thread that I hope may help other founders starting out 👇
— Suhail (@Suhail) April 14, 2021

Innovation And Emerging Trends

Supply Chain | Kroger launches a massive robot-filled fulfillment center. (TC)

Automotive | Ford takes aim at Tesla, GM with its autonomous system. (TC)

Crypto | AXA allows customers to pay insurance premiums in bitcoin. (TB)

FinTech | One Finance CEO eyes massive overhaul of digital finance. (Fox)

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.

Notice: To view this week’s big picture outlook, click here.

What Happened: Alongside hopes for more stimulus spending to help the U.S. recover from the pandemic downturn, U.S. index futures established a new all-time high in the overnight session, before backing off into prior-range and -value.

What Does It Mean: After the resolve of a long-liquidation earlier in the week, the market is in price discovery mode, trending to establish balance, or two-sided trade.

What To Expect: Friday’s regular session (9:30 AM – 4:00 PM ET) will likely open close to prior-balance and -range, implying higher volatility at the open.

Few dynamics to note: (1) poor structure in prior sessions, as evidenced by the low-volume areas (LVNodes) in the graphic above, (2) divergence from developing value, (3) a new overnight all-time high (i.e., historically, there is a low probability that overnight all-time highs end the upside discovery process), as well as (4) unsupportive speculative flows and delta in some instances.

Given the above dynamics, the go/no-go level for upside in the S&P 500 is the $3,817.75 overnight high. The go/no-go level for downside is the low-volume node at $3,787.50, an area that denotes upside conviction. On any virgin test, the S&P 500 ought to find support at this LVNode. However, should the index break below that level, then conviction has changed.

In a failure to break either go/no-go level, the normal course of action would be responsive trade.

Noting: Since the prior day’s range is close by, any acceptance (i.e., at least one half-hour of trade) of price within prior value reduces the odds of a dynamic move.

Levels Of Interest: $3,817.75 overnight high and $3,787.50 LVNode.