The S&P 500 (INDEX: SPX) recovered after a violent sell-off led by products like the SPDR S&P Regional Banking ETF (NYSE: KRE). This is before updates on the Federal Reserve’s (Fed) monetary policy today.
Graphic: Retrieved from Danny Kirsch of Piper Sandler Companies (NYSE: PIPR).
The consensus is the Fed ratchets up the target rate to 5.00-5.25%. Following this, it is likely to keep rates at this higher level for longer than markets expect, letting the effects of the tightening work through the economy and tame the still-sticky inflation (e.g., lenders eating the cost of interest to sell more goods, job vacancies dropping, and payrolls surprising higher).
Graphic: Retrieved from Citigroup Inc (NYSE: C) via Bloomberg. “The Fed’s own projections from March suggest rates will be only just above 5% by year’s end — implying a protracted pause with no cuts, after the most aggressive hiking campaign in decades. It’s marked in red in the chart [above].”
Strategists at JPMorgan Chase & Co (NYSE: JPM) think a “hike and pause” scenario prompts a push higher in stocks.
“Here, the Fed would be relying on a tightening of lending standards stemming from the banking crisis to act as de facto rate hikes. Any language that the market interprets as the Fed being on pause should benefit stocks,” JPM wrote. “This outcome is not fully priced into equities.”
This idea was alluded to in yesterday’s letter; stocks likely do “ok” in a higher rates for longer environment. Beyond economic surprises and the debt ceiling issue, the Fed’s balance sheet (not likely to be addressed in this next announcement) strategists like Andy Constan of Damped Spring Advisors are most concerned about, since the size of quantitative easing or QE made stocks less sensitive to interest rates. Ratcheting quantitative tightening or QT, the flow of capital out of markets, would prompt some increased bearishness among those strategists.
Graphic: Retrieved from Bank of America Corporation (NYSE: BAC) via Macro Ops.
JPM strategists add the market may continue “artificially suppress[ing] perceptions of fundamental macro risks,” prompting upside momentum.
“We expect these inflows to persist over the next two weeks, with several more large returns expected to drop from the trailing sample window,” Tier1Alpha explains. “Even if market volatility increases during this time, it would take exceptionally significant moves to trigger substantial selling. While these inflows are advantageous during market upswings, it’s essential to remember that they can be particularly brutal on the way back down once volatility inevitably returns.”
Eventually, “as recessionary conditions proliferate,” EPB’s Eric Basmajian says, asset prices will turn. Downside accelerants include the debt limit breach, which Nasdaq Inc (NASDAQ: NDAQ) and Moody’s Corporation (NYCE: MCO) think portends recession and volatility spike.
Trade ideas and more in our recently published report.
Welcome to the Daily Brief by Physik Invest, a soon-to-launch research, consulting, trading, and asset management solutions provider. Learn about our origin story here, and consider subscribing for daily updates on the critical contexts that could lend to future market movement.
Separately, please don’t use this free letter as advice; all content is for informational purposes, and derivatives carry a substantial risk of loss. At this time, Capelj and Physik Invest, non-professional advisors, will never solicit others for capital or collect fees and disbursements. Separately, you may view this letter’s content calendar at this link.
First Republic Bank (NYSE: FRC) is in the news for its failure. FRC was known for handing out mortgages at rock-bottom rates. When interest rates rose, the bank’s book of mortgages was hurt and left it with not enough to suffice withdrawals.
“FRC believed its business model of extraordinary customer service and product pricing would result in superior customer loyalty through all cycles,” wrote Timothy Coffey of Janney Montgomery Scott. “Instead, too many FRC customers showed their true loyalties were to their own fears.”
This “marks the second-biggest bank failure in U.S. history, behind the 2008 collapse of Washington Mutual Inc.,” reports WSJ; after the instability in March, the bank finally succumbed to the Federal Reserve’s (Fed) rate increases and depositor worry.
JPMorgan Chase & Co (NYSE: JPM) acquired the bulk of FRC’s operations.
Graphic: Retrieved from JPM. See a nice summary by @brandonjcarl.
Further, research shows money is getting tighter, a headwind for the economy, while inflation is sticky and the Fed’s bond holdings are preventing tightening from being effective; WSJ reports the Fed’s balance sheet loaded with bonds may be insulating stocks from interest rate policies.
“Quantitative easing locked the Fed into a position that is difficult to unwind,” said Stephen Miran of Amberwave Partners. Quantitative easing, or QE, made stocks less sensitive to interest rates. “It’s made tightening both slower and less effective than it should have been.”
Graphic: Retrieved from Bloomberg. The Fed’s favorite measure of inflation, the core PCE index, has been consistently stuck around 4-5% since 2022. The employment cost index, which shows wage growth at around 4-5%, is inconsistent with a 2% inflation target.
Not “adjusting balance-sheet policy,” but raising rates to 5.00-5.25% as expected, ‘is akin to “hitting the same nail with a hammer over and over again.’” Therefore, stocks, which are higher alongside surprising economic and earnings data, though risky, can do “ok” for longer, comments Andy Constan of Damped Spring Advisors.
Graphic: Retrieved from CME Group Inc’s (NASDAQ: CME) FedWatch Tool.
The sale of volatility bolsters the stability and emboldens upside bettors, adds JPM’s Marko Kolanovic, who finds “selling of options forces intraday reversion, leaving the market price virtually unchanged many days.”
Graphic: Retrieved from Goldman Sachs Group Inc (NYSE: GS).
“This, in turn, drives buying of stocks by funds that mechanically increase exposure when volatility declines (e.g., volatility targeting and risk parity funds),” he elaborates. “This market dynamic artificially suppresses perceptions of fundamental macro risks. The low hurdle rate and robust fundamentals bode well for 1Q earnings results, but we advise using any market strength on reporting to reduce exposure.”
At this juncture, yes, stocks can move sideways or higher for a bit longer as a function of “momentum, not value,” Simplify Asset Management’s Michael Green concludes. Traders can position for this and various levels of potential upset later with structures included in a report we published last week.
About
Welcome to the Daily Brief by Physik Invest, a soon-to-launch research, consulting, trading, and asset management solutions provider. Learn about our origin story here, and consider subscribing for daily updates on the critical contexts that could lend to future market movement.
Separately, please don’t use this free letter as advice; all content is for informational purposes, and derivatives carry a substantial risk of loss. At this time, Capelj and Physik Invest, non-professional advisors, will never solicit others for capital or collect fees and disbursements. Separately, you may view this letter’s content calendar at this link.
Although banks’ earnings were better than anticipated, sone figures indicate that the broader economy is declining, as retail sales and manufacturing output fell more than projected. Despite the challenges, most believe the Federal Reserve will raise interest rates next month.
Loretta Mester of the Federal Reserve, explained there should be another rate hike as the monetary policy will need to be more restrictive this year, with the fed funds rate rising above 5% and the real fed funds rate remaining positive for an extended period.
Thus far, monetary policymakers’ efforts to work liquidity out of the system have been complicated, particularly with rates at the back end falling, said Kai Volatility’s Cem Karsan in a conversation with TD Ameritrade Network. CrossBorder Capital confirms. Liquidity has been on an upward trend since October, partly due to China’s efforts to recover from Covid-19 restrictions and the collapse of the UK gilts markets.
Graphic: Retrieved from CrossBorder Capital via Bloomberg.
“Our original conjecture that Central Banks have effectively split their policy tools to use quantitative or balance sheet policies (QE) to ensure financial stability, whilst targeting inflation with interest rate policy is becoming more widely discussed in the media,” CrossBorder Capital’s Mike Howell said. “This splitting of roles can explain why interest rates have risen at the same time that Global Liquidity is turning higher.”
Accordingly, with the recent response to the bank issues cutting down tail risks for the S&P 500 (INDEX: SPX), markets are positioned to stay contained with falling implied volatility (IVOL) and correlations, as well as the passage of time, positioning-wise, key market boosters, Karsan added.
It’s appears the SPX may strengthen before it weakens with risk indicators, including IVOL measures, rising with the SPX. Physik Invest agrees: buy call structures on any weakness and monetize them into strength to finance long dated put structures.
It is better for traders to limit their expectations and stay the course, despite the big gap between IVOL measures like the Cboe Volatility Index and Merrill Lynch Option Volatility Estimate or MOVE, and big bets on market movement in the VIX complex, potentially to hedge against the breach of the US debt limit as soon as June.
As an aside, recent VIX hedging makes sense given that a breach of the debt limit likely results in recession, a ~20% drop in equities, and a volatility spike, Moody’s said.
Graphic: Retrieved from Nasdaq Inc (NASDAQ: NDAQ).
Quoting The Ambrus Group’s Kris Sidial, “When volatility starts to move, it moves at a higher rate than S&P volatility which is something that’s really important for the call option buyers,” which are stepping in aggressively as we’ve shown in the past letters.
Graphic: Retrieved from Piper Sandler Companies’ (NYSE: PIPR) Danny Kirsch. “With $VIX sitting at lowest level since early 2022, VIX call open interest approaching all-time highs reached in 2017/2018.”
About
Welcome to the Daily Brief by Physik Invest, a soon-to-launch research, consulting, trading, and asset management solutions provider. Learn about our origin story here, and consider subscribing for daily updates on the critical contexts that could lend to future market movement.
Separately, please don’t use this free letter as advice; all content is for informational purposes, and derivatives carry a substantial risk of loss. At this time, Capelj and Physik Invest, non-professional advisors, will never solicit others for capital or collect fees and disbursements. Separately, you may view this letter’s content calendar at this link.
Physik Invest’s Daily Brief is read free by thousands of subscribers. Join this community to learn about the fundamental and technical drivers of markets.
Graphic updated 9:10 AM ET. Sentiment Risk-On if expected /MES open is above the prior day’s range. /MES levels are derived from the profile graphic at the bottom of this letter. Click here for the latest levels. SqueezeMetrics Dark Pool Index (DIX) and Gamma (GEX) with the latter calculated 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. The lower the GEX, the more (expected) volatility. Click to learn the implications of volatility, direction, and moneyness. Breadth reflects a reading of the prior day’s NYSE Advance/Decline indicator. The CBOE VIX Volatility Index (INDEX: VVIX) reflects the attractiveness of owning volatility. UMBS prices via MND. Click here for the economic calendar.
Administrative
Sorry for the delay. Please read through the positioning section. Have a great Monday!
As always, if there are holes or unclear language. We will fix this in the next letters.
Fundamental
On 3/22, we mentioned news of Russia wanting to adopt the yuan for settlements.
Putin: We are in favor of using the Chinese yuan for settlements between Russia and the countries of Asia, Africa, and Latin America. I am confident that these forms of settlement in yuan will develop between Russian partners and their counterparts in third countries. pic.twitter.com/Mnw1WfjW4Y
And, with that, publications covering these East alliances use some tough language. One Bloomberg article notes China and Russia “roll[ing] back US power and alliances … [to] create a multipolar world … [and] diminish the reach of democratic values, so autocratic forms of government are secure and even supreme.”
Let’s rewind a bit to understand why all the toughness and fear.
If the US dollar's global supremacy erodes, America will face a reckoning like none before.
Recall Chinese President Xi Jinping speaking with Saudi and GCC leaders. Here is our 1/4 summary takeaway:
Graphic: Retrieved from Physik Invest’s Daily Brief for January 4, 2023.
Essentially, those remarks confirm the East is hedging sanctions risk. Reliance on the West is falling, and this inevitably will present “non-linear shocks” (i.e., “inflation mess caused by geopolitics, resource nationalism, and BRICS”) monetary policymakers are not equipped to handle. So, are the markets at risk?
President Xi to President Putin:
“Change that hasn’t happened in 100 years is coming and we are driving this change together.”
This most recent meeting between China and Russia increases the risks of unwinding the “debt-fueled economy in the US,” FT’s Rana Foroohar confirms, as we wrote in the Daily Brief for 1/4. Further, this is a threat to “hidden leverage and opaqueness.” That means the markets are at risk. Let’s explain more.
With the encumbrance of commodities, among other initiatives, these nations’ weight in currency baskets may rise and keep “inflation from slowing.” If that happens, future rate expectations are off. Additionally, “the US dollar and Treasury securities will likely be dealing with issues they never had to deal with before: less demand, not more; more competition, not less,” we quoted Zoltan Pozsar (ex-Credit Suisse) saying on 1/5.
The markets most responsive to this are public, as we saw with 2022’s de-rate. In 2023 and beyond, added liquidation-type risks lie in the private markets. This will have knock-on effects.
The likes of The Ambrus Group’s Kris Sidial mentioned to your newsletter writer in a Benzinga interview that private market investors’ raising of cash to meet capital calls could prompt sales of their more liquid public market holdings. This is a major risk Sidial noted he was watching, in addition to some risks in the derivatives markets.
At the same time, Eric Basmajian believes the “banking crisis will cause a tightening of money and credit.” This will further solidify the “broader business cycle and corporate profit recession.”
Graphic: Retrieved from Bloomberg. Per John Authers, “the combination of deeply troubled banks and strong performance for the rest of the stock market cannot persist much longer.”
Positioning
Sidial’s well positioned to take advantage of the realization of these risks. In January, he explained that measures like the Cboe VIX Volatility Index (INDEX: VVIX) were low. This suggested, “we can get cheap exposure to convexity while a lot of people are worried.” In an update to Bloomberg, Sidial said The Ambrus Group’s tail-risk strategy (which Sidial has explained to us before) has performed well as the VIX index has risen, a sign of traders hedging concerns about “some contagion hitting and their portfolios being destroyed on that.”
“We have seen an increase in tail hedging,” added Chris Murphy of Susquehanna International Group. “We have continued to see call buying in the VIX since the bank turmoil began.” The caveat, though, is that realized volatility or RVOL, not just implied volatility or IVOL (i.e., that which is implied by traders’ supply and demand of options), must shift and stay higher for those options to maintain their values, which may be difficult according to Kai Volatility’s Cem Karsan.
Though Karsan thinks markets will likely see RVOL come back in a big way, he thinks policymakers’ intervention will be stimulative short-term as it reverses a lot of the quantitative tightening or QT (i.e., flow of capital out of capital markets). Stimulation will be compounded by the continued unwinding of hedging strategies in previously depressed products like the Nasdaq 100 (INDEX: NDX). What do we mean by this?
Recall that traders’ closure and/or monetization of put protection results in options counterparties buying back their short stock and/or futures hedges. Therefore, before any downside is realized, the market may trade into a far “more combustible” position.
Consequently, look for low- and zero-cost call structures (e.g., ratio spreads) to play the upside while opportunistically using higher prices and elevated volatility skew to put on bear put spreads (i.e., buy put and sell another put at a lower strike price) for cheaper prices.
Consider following and supporting us on social media:
As of 9:10 AM ET, Monday’s regular session (9:30 AM – 4:00 PM ET), in the S&P 500, is likely to open in the upper part of a positively skewed overnight inventory, outside of the prior day’s range, suggesting a potential for immediate directional opportunity.
The S&P 500 pivot for today is $4,026.75.
Key levels to the upside include $4,038.75, $4,049.75, and $4,062.25.
Key levels to the downside include $4,004.25, $3,994.25, and $3,980.75.
Disclaimer: Click here to load the updated key levels via the web-based TradingView platform. New links are produced daily. Quoted levels likely hold barring an exogenous development.
Graphic: 65-minute profile chart of the Micro E-mini S&P 500 Futures.
Definitions
Volume Areas: Markets will build on areas of high-volume (HVNodes). Should the market trend for some time, this will be identified by a low-volume area (LVNodes). The LVNodes denote directional conviction and ought to offer support on any test.
If participants auction and find acceptance in an area of a prior LVNode, then future discovery ought to be volatile and quick as participants look to the nearest HVNodes for more favorable entry or exit.
About
The author, Renato Leonard Capelj, spends the bulk of his time at Physik Invest, an entity through which he invests and publishes free daily analyses to thousands of subscribers. The analyses offer him and his subscribers a way to stay on the right side of the market.
You may view this letter’s content calendar at this link.
Disclaimer
Do not construe this newsletter as advice. All content is for informational purposes. Capelj and Physik Invest manage their own capital and will not solicit others for it.
Physik Invest’s Daily Brief is read free by thousands of subscribers. Join this community to learn about the fundamental and technical drivers of markets.
Graphic updated 9:20 AM ET. Sentiment Risk-Off if expected /MES open is below the prior day’s range. /MES levels are derived from the profile graphic at the bottom of this letter. Click here for the latest levels. SqueezeMetrics Dark Pool Index (DIX) and Gamma (GEX) with the latter calculated 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. The lower the GEX, the more (expected) volatility. Click to learn the implications of volatility, direction, and moneyness. Breadth reflects a reading of the prior day’s NYSE Advance/Decline indicator. The CBOE VIX Volatility Index (INDEX: VVIX) reflects the attractiveness of owning volatility. UMBS prices via MND. Click here for the economic calendar.
Fundamental
Our Daily Brief for 3/23 discussed reactions to the Federal Reserve’s (Fed) interest rate decision being countered by Treasury secretary Janet Yellen’s deposit guarantee comments. Accordingly, doom and gloom are in full bloom prompting Yellen to walk back her toughness and tell lawmakers that regulators would protect the banking system if warranted. However, this did little to assuage markets, hence the neutral-to-risk-off sentiment this morning.
Based on the Fed’s Overnight Reverse Repo (RRP) and Bank Term Funding Program (BTFP), as well as money-market flows, strategists believe the deposit flight has not stabilized. To explain, policymakers intervened on the heels of the banking crisis in a way that’s not to be confused with quantitative easing or QE (i.e., flow of capital into markets). The Fed’s balance sheet swelled (from the discount window, the new bank funding facilities, and spillover from the FDIC insurance backstop). The balance sheet has continued to swell while money market funds and the RRP facility see big inflows.
Strategists like Andreas Steno Larsen allege that the maturity of 3-month T-bills and deposit flights partly drives this swell.
Rather than being used to boost liquidity (i.e., “lend or to finance trading activities,” as discussed in previous letters, including 9/20), reserves are being sterilized. “The Fed’s actions to stem the banking crisis are beginning to accelerate the effects of [quantitative tightening or] QT, causing money velocity to drop and intensifying the tightening of financial conditions,” Bloomberg’s Simon White reports. “In the coming weeks and months, we are likely to see reserves leaving the high-velocity world of smaller banks, where they were being lent out more, to the effectively zero-velocity black-hole of” money-market funds and RRP.
JPMorgan Chase & Co (NYSE: JPM) validates this view. They think the Fed’s rate hikes and QT have coincided with funds going to money-market funds and larger banks. They add that the banking crisis has accelerated this movement.
“Deposit movements could cause banks to be cautious on lending, with mid- and small-size banks playing a large role in US lending,” thus exacerbating recessionary pressures, they note. Bank of America Corporation (NYSE: BAC) strategists add that investors should sell equities after the last rate hike to sidestep “the biggest declines.”
Graphic: Retrieved from Goldman Sachs Group Inc (NYSE: GS).
Positioning
Brief positioning update.
As proposed in previous letters, low- or zero-cost call options structures have worked and may continue to work.
Notwithstanding, look for opportunities to play the downside as markets trade higher into a “more combustible” position. Attractive bear put spread trades are showing in the previously depressed Nasdaq 100, where boosts have, in part, been the result of “volatility compression and options decay.” If you’re participating in the Nasdaq, at least you have breadth on your side.
Graphic: Retrieved from ZeroHedge.
Technical
As of 9:20 AM ET, Friday’s regular session (9:30 AM – 4:00 PM ET) in the S&P 500 will likely open in the lower part of a negatively skewed overnight inventory, outside of the prior day’s range, suggesting a potential for immediate directional opportunity.
The S&P 500 pivot for today is $3,957.25.
Key levels to the upside include $3,980.75, $3,994.25, and $4,005.00.
Key levels to the downside include $3,937.00, $3,921.25, and $3,891.00.
Disclaimer: Click here to load the updated key levels via the web-based TradingView platform. New links are produced daily. Quoted levels likely hold, barring an exogenous development.
Graphic: 65-minute profile chart of the Micro E-mini S&P 500 Futures.
Definitions
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: Markets will build on areas of high-volume (HVNodes). Should the market trend for some time, this will be identified by a low-volume area (LVNodes). The LVNodes denote directional conviction and ought to offer support on any test.
If participants auction and find acceptance in an area of a prior LVNode, then future discovery ought to be volatile and quick as participants look to the nearest HVNodes for more favorable entry or exit.
POCs: Areas where two-sided trade was most prevalent in a prior day session. Participants will respond to future value tests as they offer favorable entry and exit.
About
The author, Renato Leonard Capelj, spends the bulk of his time at Physik Invest, an entity through which he invests and publishes free daily analyses to thousands of subscribers. The analyses offer him and his subscribers a way to stay on the right side of the market.
You may view this letter’s content calendar at this link.
Disclaimer
Do not construe this newsletter as advice. All content is for informational purposes. Capelj and Physik Invest manage their own capital and will not solicit others for it.
Physik Invest’s Daily Brief is read free by thousands of subscribers. Join this community to learn about the fundamental and technical drivers of markets.
Graphic updated 8:20 AM ET. Sentiment Neutral if expected /MES open is inside of the prior day’s range./MES levels are derived from the profile graphic at the bottom of this letter. Click here for the latest levels. SqueezeMetrics Dark Pool Index (DIX) and Gamma (GEX) with the latter calculated 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. The lower the GEX, the more (expected) volatility. Click to learn the implications of volatility, direction, and moneyness. Breadth reflects a reading of the prior day’s NYSE Advance/Decline indicator. The CBOE VIX Volatility Index (INDEX: VVIX) reflects the attractiveness of owning volatility. UMBS prices via MND. Click here for the economic calendar.
Administrative
Recall our past letters pondering the use of the yuan for settlements in the East. Well, there’s been progress on that end.
Putin: We are in favor of using the Chinese yuan for settlements between Russia and the countries of Asia, Africa, and Latin America. I am confident that these forms of settlement in yuan will develop between Russian partners and their counterparts in third countries. pic.twitter.com/Mnw1WfjW4Y
Also recall “the recycling of petrodollars by oil-rich nations” fueling “several emerging market debt crises” and prompting “the creation of a more speculative, debt-fueled economy in the US.” Is this a reversing trend? We shall unpack in a future letter, soon.
Fundamental
The Federal Reserve (Fed) is likely to bump its current target rate up 25 basis points to 4.75-5.00%. Failing to bump interest rates would likely send the wrong message about financial stability. To give up on the inflation fight (a pause or interest rate cut) would tell investors “look out below,” Bloomberg summarizes.
Graphic: Retrieved from CME Group Inc’s (NASDAQ: CME) FedWatch Tool.
The path after is less certain, though most think there is likely to be at least one additional hike in the coming months. The catch is that if market-induced financial tightening persists through the second quarter, it would substitute for rate hikes.
Assuming the Fed publishes its summary of economic projections (SEP) or dot plot, they will likely show the governors “getting less aggressive,” adds Bloomberg’s John Authers.
If we recall, Kai Volatility’s Cem Karsan talked about the Fed not wanting liquidations; they want a slow sale, not a fire sale. So, with there being a lag, the Fed may want to slow and assess, carefully telegraphing this being not a pivot. A pivot would probably inspire confidence among investors to own assets “mak[ing] things hotter,” Karsan explains, noting that the Fed really needs to walk up the long end of the yield curve. Recall that the long end fell considerably on the back of the turmoil and intervention, as well as recent data (e.g., housing starts showing more supply, likely a mortgage application booster that would further “make things hotter”).
In large part the result of low liquidity, Treasury volatility could prompt the Fed to adjust their quantitative tightening or QT (i.e., the flow of capital out of capital markets) program, instead. Just as quantitative easing or QE (i.e., the flow of capital into capital markets) did little to spark off inflation, it’s unlikely that temping QT would disrupt efforts to rein inflation.
Graphic: Retrieved from CME Group Inc’s (NASDAQ: CME) Liquidity Tool. Per a Bloomberg article, “the spread between offered prices and what sellers will accept has widened for all maturities, … a sign of thinning market depth” and illiquidity.
Adjusting QT, which is contributing to the excessive volatility, “would be preferable to not raising rates … [since] an abrupt pause in rate hikes would likely resurrect the notion that there’s, indeed, a Fed ‘put’ designed to bail out Wall Street at the first sign of stress,” a potential catalyst for market upside, says Robert Burgess.
In Tuesday’s letter, we talked about the potential for fears of downside easing and fears of missing out (i.e., FOMO) on upside rising. Specifically, the letter said the following:
“A response may be FOMO-type demand for call options exposures, coupled with CTAs further ‘raising their equity exposure’ on trend signals and lower volatility, boosting markets into a ‘more combustible’ state as explained on 2/17. This fear of missing out is visible in options volatility skew; traders are hedging those tail outcomes.”
In support of the most recent strength, per JPMorgan Chase & Co’s (NYSE: JPM) trade desk commentary, there is a buy skew. Goldman Sachs Group Inc (NYSE: GS) strategists agree, noting that flows are almost entirely “cover-driven.”
Recall that traders sought protection amidst all the calamities recently. Accordingly, measures of implied volatility or IVOL including the Cboe Volatility Index or VIX rose (e.g. traders demand exposure to downside put protection by way of S&P 500 options which bids options prices and manifests higher IVOL and counterparty pressure from their equity future/stock sales to hedge this demand). These same measures of IVOL are now falling as traders’ closure of protection results in counterparty pressures being lifted (helping explain, in part, the above “cover-driven” remark by GS).
Does this rally have breadth behind it? Look no further than market internals.
Graphic: Retrieved from Bloomberg via Liz Young. “The Nasdaq’s Cumulative Advance-Decline line has parted ways with index direction in recent days. In other words, the index has rallied despite weak breadth (more stocks falling than rising), the two lines are likely to find their way back together somehow…”
A pause before the Fed announcement, and then breadth catches up to price?
Or, has the typical post-Fed IVOL boost been spent?
Regardless, we maintain that low-cost call options structures as proposed in previous letters worked (and may continue to work). Notwithstanding, look for opportunities to play the downside should markets trade higher into a “more combustible” position.
More on trade ideas in the next letters. Take care.
Technical
As of 8:15 AM ET, Wednesday’s regular session (9:30 AM – 4:00 PM ET), in the S&P 500, is likely to open in the upper part of a negatively skewed overnight inventory, inside of the prior day’s range, suggesting a limited potential for immediate directional opportunity.
The S&P 500 pivot for today is $4,038.75.
Key levels to the upside include $4,059.25, $4,071.75, and $4,082.75.
Key levels to the downside include $4,017.00, $3,994.25, and $3,977.00.
Disclaimer: Click here to load the updated key levels via the web-based TradingView platform. New links are produced daily. Quoted levels likely hold barring an exogenous development.
Graphic: 65-minute profile chart of the Micro E-mini S&P 500 Futures (bottom middle).
Definitions
Volume Areas: Markets will build on areas of high-volume (HVNodes). Should the market trend for a period of time, this will be identified by a low-volume area (LVNodes). The LVNodes denote directional conviction and ought to offer support on any test.
If participants auction and find acceptance in an area of a prior LVNode, then future discovery ought to be volatile and quick as participants look to the nearest HVNodes for more favorable entry or exit.
POCs: 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.
About
The author, Renato Leonard Capelj, spends the bulk of his time at Physik Invest, an entity through which he invests and publishes free daily analyses to thousands of subscribers. The analyses offer him and his subscribers a way to stay on the right side of the market.
You may view this letter’s content calendar at this link.
Disclaimer
Do not construe this newsletter as advice. All content is for informational purposes. Capelj and Physik Invest manage their own capital and will not solicit others for it.
Physik Invest’s Daily Brief is read free by thousands of subscribers. Join this community to learn about the fundamental and technical drivers of markets.
Graphic updated 6:15 AM ET. Sentiment Risk-Off if expected /MES open is below the prior day’s range. /MES levels are derived from the profile graphic at the bottom of this letter. Click here for the latest levels. SqueezeMetrics Dark Pool Index (DIX) and Gamma (GEX) with the latter calculated 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. The lower the GEX, the more (expected) volatility. Click to learn the implications of volatility, direction, and moneyness. Breadth reflects a reading of the prior day’s NYSE Advance/Decline indicator. The CBOE VIX Volatility Index (INDEX: VVIX) reflects the attractiveness of owning volatility. UMBS prices via MND. Click here for the economic calendar.
Administrative
As indicated yesterday, through the end-of-this week, newsletters may be shorter due to the letter writer’s commitments. Therefore, please read the Daily Brief for March 14, if you haven’t already, for a big discussion on bond and equity market volatility, as well as the odds of the market falling apart or rising, and positioning contexts that support that movement. If there are any incomplete statements below, we shall complete them in the coming letters. We’re laying it all out for awareness. Take care!
Fundamental
Headline inflation via CPI (Consumer Price Index) fell most on energy and core goods while shelter, food, and services inflation continues to be sticky. Core prices continue to be high, risking “inflationary psychology [] becoming ingrained,” Bloomberg’s John Authers explains.
“There’s nothing in this report to suggest that inflation is defeated already,” explained Authers. “Not to raise the fed funds rate next week, with median inflation above 7%, would be a sign of panic,” and an acknowledgment of uncertainties with regard to the banking system, as talked about in the Daily Brief on March 14.
To note, however, contagion appears contained, despite Moody’s Corporation (NYSE: MCO) cutting its outlook for the banking system to negative from stable, and placing lenders including First Republic Bank (NYSE: FRC) on a downgrade review.
JPMorgan Chase & Co’s (NYSE: JPM) Marko Kolanovic did cut his equity allocation warning that not all carry trades, something this letter has talked about numerous times before (i.e., borrow at a low rate and invest in something that provides higher return), can be bailed out. Kolanovic appears worried about commercial real estate, which Simplify Asset Management’s Michael Green just told your letter writer is in a bubble that “we’re seeing crack,” finally.
Graphic: Retrieved from Bloomberg. The Federal Reserve’s new Bank Term Funding Program or BTFP is “QE in another name – assets will grow on the Fed balance sheet which will increase reserves.” Recall that QE is the flow of capital into capital markets while QT is the opposite. Q is for quantitative while E is for easing and T is for tightening.
Anyways, following yesterday’s CPI, traders price higher odds of a 25 basis point hike which puts the terminal or peak fed funds rate at 4.75-5.00%. Following this spring, factoring potential inflation plateau and financial system uncertainties, traders foresee the Fed easing. By year-end, traders expect rates to fall down to 3.75-4.00%. Recall that at the beginning of last week, there were no expectations of easing in 2023. Also, traders thought the Fed would raise as high as 5.50-5.75%.
Mortgage rates, determined by changes in the price of mortgage-backed securities or MBSs, fell too.
ARK Invest’s Cathie Wood, who your letter writer had the honor of interviewing in person for Benzinga articles, thinks we’re on the cusp of the “roaring twenties” as inflation “is likely to surprise on the low side of expectations” with the banking crisis also leading to “bad deflation.”
“Today, five major innovation platforms are evolving at the same time – multiomics sequencing, robotics, energy storage, artificial intelligence, and blockchain technology, all of which are converging,” she elaborates.
“Once the Fed stops looking backward at CPI inflation and starts addressing the deflationary banking crisis that a 19-fold increase in short rates and an inverted yield have caused, we would not be surprised to see a return to the Roaring Twenties.”
Graphic: Retrieved from Bloomberg.
On the backward-looking measures quote in the above paragraph, former Fed trader Joseph Wang notes that the Fed and central banks, in general, are aware segments of the market may break, but that won’t discourage them from tightening further.
“As the BOE saved the gilt market through purchases and kept tightening, so the Fed can save banks and keep tightening.”
Positioning
Tuesday’s letter said that following important events like CPI, the compression of wound implied volatility or IVOL, coupled with the nearing large options expirations (OpEx), sets the market up for potential short bursts of strength into the end of the month and next month.
That’s along the lines of what is happening. The S&P 500 rose mechanically after the release of CPI yesterday. Later, though the index succumbed, internally speaking the market remained strong through end-of-day, hence some short bursts boosted by some short-dated options activities, also.
As explained, yesterday, the recent re-grossing theme appears intact. Any further compression of wound IVOL and the passage of options expirations (OpEx) could support equities as month-end approaches. Though it may be too early to position for strength, one may consider it the way it was explained in the Daily Brief on March 14.
Technical
As of 6:15 AM ET, Wednesday’s regular session (9:30 AM – 4:00 PM ET), in the S&P 500, is likely to open in the middle part of a negatively skewed overnight inventory, inside of the prior day’s range, suggesting a limited potential for immediate directional opportunity.
The S&P 500 pivot for today is $3,904.25.
Key levels to the upside include $3,921.75, $3,945.00, and $3,970.75.
Key levels to the downside include $3,884.75, $3,868.25, and $3,847.25.
Disclaimer: Click here to load the updated key levels via the web-based TradingView platform. New links are produced daily. Quoted levels likely hold barring an exogenous development.
Graphic: 65-minute profile chart of the Micro E-mini S&P 500 Futures.
Definitions
Volume Areas: Markets will build on areas of high-volume (HVNodes). Should the market trend for a period of time, this will be identified by a low-volume area (LVNodes). The LVNodes denote directional conviction and ought to offer support on any test.
If participants auction and find acceptance in an area of a prior LVNode, then future discovery ought to be volatile and quick as participants look to the nearest HVNodes for more favorable entry or exit.
POCs: 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.
Volume-Weighted Average Prices (VWAPs): A metric highly regarded by chief investment officers, among other participants, for quality of trade. Additionally, liquidity algorithms are benchmarked and programmed to buy and sell around VWAPs.
About
The author, Renato Leonard Capelj, spends the bulk of his time at Physik Invest, an entity through which he invests and publishes free daily analyses to thousands of subscribers. The analyses offer him and his subscribers a way to stay on the right side of the market.
You may view this letter’s content calendar at this link.
Disclaimer
Do not construe this newsletter as advice. All content is for informational purposes. Capelj and Physik Invest manage their own capital and will not solicit others for it.
Physik Invest’s Daily Brief is read by thousands of subscribers. You, too, can join this community to learn about the fundamental and technical drivers of markets.
Graphic updated 8:05 AM ET. Sentiment Risk-On if expected /ES open is above the prior day’s range. Click here for the latest levels. SqueezeMetrics Dark Pool Index (DIX) and Gamma (GEX) with the latter calculated 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. Click to learn the implications of volatility, direction, and moneyness. Breadth reflects a reading of the prior day’s NYSE Advance/Decline indicator. The CBOE VIX Volatility Index (INDEX: VVIX) reflects the attractiveness of owning volatility. UMBS price via MND. Click here for the calendar.
Fundamental
Companies are slowing price increases,
The Transcript, quoting earnings calls, shared with subscribers. Notwithstanding, consumer spending still reads strong. Mastercard Inc (NYSE: MA) measured ~9% growth in spending last month, and this points to the presence of inflation in the system that needs to be worked out.
Consequently, Federal Reserve (Fed) officials maintain that “more needs to be done”, and this is evident in traders’ guesses as to where rates peak (i.e., terminal rate), and when the eventual reduction in rates is set to occur (i.e., easing).
The free CME Group Inc (NASDAQ: CME) FedWatch Tool shows rates peaking in the 5.00-5.25% range through November. Then, in December, traders price a move back to the 4.75-5.00% range where we are now.
Graphic: Retrieved from CME Group Inc’s (NASDAQ: CME) Fedwatch Tool.
This is the pricing is in anticipation of rising consumer prices; the Consumer Price Index (CPI) due at 8:30 AM ET, is set to rise 0.5% in January, the most in a few months. Core CPI, which matters a lot to the Fed, is set to advance by about 0.4%.
JPMorgan Chase & Co (NYSE: JPM) thinks that “data close to estimates would be treated as confirming a continued cooling in inflation, which would imply a fall for bond yields and the dollar, while tech shares would lead an advance for US stocks.”
“But, anyequitygains are likely to fade, [JPM] warned, ‘once investors shift attention to a relatively slower pace of disinflation than the previous two months, where each CPI print saw a decrease of 60 basis points.’”
So in-line CPI, coupled with a strong January jobs report, will “corroborate recent comments from Fed officials that further interest-rate hikes are likely forthcoming,” Bloomberg adds. In a post by Joseph Wang, a former Fed trader, “a higher interest rate environment implies a more potent [quantiative tightening or] QT.”
“The Fed’s aggressive hikes have yet to reach the bulk of bank deposits, which is the foundational financial asset for many households. These deeply negative real yields may be extending the portfolio rebalancing impact of QE. Some households have escaped financial repression by moving into Treasury bills or money market funds, but that is not the only refuge. The perceived return of risk assets likely remains high for many, as the memory of the 2021 boom is still fresh.” Further, a “sizable yield upgrade being forced onto the market may indicate a more impactful QT.”
QT, to put it simply, is the flow of capital out of capital markets. Higher rates for longer and more QT arenot good for risk assets. Though money is flowing from other parts of the world, which, in part, has bolstered buying of assets over the past months, accelerating “QT shifts the composition of financial assets towards those that better reflect the Fed’s restrictive stance.”
Positioning
In the post-CPI expirations, implied volatility (IVOL), a demonstration of traders’ fears and demands for protection, is wound and is likely to serve as a catalyst for a fast move after CPI. Should fears be assuaged (i.e., barring the unexpected), wound volatility is likely to compress and this may result in a short-term market boost.
However, the sale and expiry of protection, after CPI and particularly the coming options expiration (OpEx), is likely to put the market in a precarious position.
According to SpotGamma, “current positioning, a result of re-grossing over the past weeks and months, has boosted dealer exposure to positive gamma.” This means counterparties (i.e., dealers) make money when the market moves and hedge in a manner that reduces volatility, “hence more rangebound trade as we have seen.”
Following OpEx, counterparty exposure to positive gamma will decline and “leave markets more at the whim of macro-type repositioning” which counterparties will do less to disrupt and more to bolster (i.e., add to movement).
Therefore, as SpotGamma summarizes, “[b]e prepared for potential relief immediately after CPI. However, across a longer time horizon, there is potential for weakness and that weakness may be exacerbated by dealer hedging.”
Technical
As of 7:15 AM ET, Tuesday’s regular session (9:30 AM – 4:00 PM ET), in the S&P 500, is likely to open in the upper part of a balanced overnight inventory, outside of the prior day’s range, suggesting a potential for immediate directional opportunity.
The S&P 500 pivot for today is $4,159.00.
Key levels to the upside include $4,168.75, $4,189.00, and $4,202.75.
Key levels to the downside include $4,137.00, $4,123.25, and $4,100.25.
Disclaimer: Click here to load the updated key levels via the web-based TradingView platform. New links are produced daily. Quoted levels likely hold barring an exogenous development.
Graphic: 65-minute profile chart of the Micro E-mini S&P 500 Futures.
Definitions
Volume Areas: Markets will build on areas of high-volume (HVNodes). Should the market trend for a period of time, this will be identified by a low-volume area (LVNodes). The LVNodes denote directional conviction and ought to offer support on any test.
If participants auction and find acceptance in an area of a prior LVNode, then future discovery ought to be volatile and quick as participants look to the nearest HVNodes for more favorable entry or exit.
POCs: 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.
About
The author, Renato Leonard Capelj, works in finance and journalism.
Capelj spends the bulk of his time at Physik Invest, an entity through which he invests and publishes free daily analyses to thousands of subscribers. The analyses offer him and his subscribers a way to stay on the right side of the market. Separately, Capelj is an options analyst at SpotGamma and an accredited journalist.
Physik Invest’s Daily Brief is read by thousands of subscribers. You, too, can join this community to learn about the fundamental and technical drivers of markets.
Graphic updated 8:20 AM ET. Sentiment Neutral if expected /ES open is inside of the prior day’s range. /ES levels are derived from the profile graphic at the bottom of this letter. Click here for the latest levels. SqueezeMetrics Dark Pool Index (DIX) and Gamma (GEX) with the latter calculated 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. Click to learn the implications of volatility, direction, and moneyness. Breadth reflects a reading of the prior day’s NYSE Advance/Decline indicator. The CBOE VIX Volatility Index (INDEX: VVIX) reflects the attractiveness of owning volatility.
Positioning
The Federal Reserve’s (Fed) decision to increase its benchmark interest rate by 25 basis points kicked off a bout of strength, boosted by the compression of wound implied volatility (IVOL). This volatility compression we observed with a shift lower in the IV term structure in the S&P 500 (INDEX: SPX). Follow-on strength surfaced on Thursday and, based on an analysis of top-line IVOL measures such as the Cboe Volatility Index (INDEX: VIX) trending higher with the SPX, it was, in part, from traders’ demands for call options, hence high call option volumes.
Graphic: Retrieved from Bloomberg via Danny Kirsch on 2/2/2023.
Recall our detailed letter published prior to February 2, 2023 (e.g., February 1, 2023, January 26, 2023, and beyond). The context was set for the SPX and VIX to trend higher; traders bidding up call options due to their fear of missing out, in the context of less liquidity to absorb those demands, would be beneficial to owners of structures like call option butterflies and ratio spreads. Additionally, owning such structures would help dampen the impact of potential SPX downside on portfolios.
For instance, on January 25, 2023, this letter said trades structured in the indexes such as the Nasdaq 100 (INDEX: NDX), where there was a steeper skew that would enable us to collect more credit in the options we are short, thereby lowering the cost of the spread we own, looked attractive, given the likelihood that the index would stay strong after the earnings reports of some big movers like Tesla Inc (NASDAQ: TSLA).
In yesterday’s letter update, we said that such trades were working spectacularly. In fact, your letter writer’s trading partner, who “initiated some +1 x -2 (17 FEB 23 13500/14000) [NDX] call ratio spreads for free (i.e., $0.00 debit or better to enter),” saw his spreads price in excess of a $40.00 credit to close, yesterday. That structure went from a $0 debit to open to a $4,000.00 credit to close. Again, nice job Justin. I’m expecting that case study, soon!
The NDX was probably the best place to be, yesterday, looking at the magnitude of movement in some of the heavyweights in the SPX, yesterday.
Noteworthy is that many of the strongest performers (e.g., Google, Amazon, Apple) weakened considerably in the after-market when their earnings, and the speeches associated, pointed to some challenges ahead.
Breadth was, generally, not that strong, to add. This validates your letter writer’s belief the market is in a precarious position. Notwithstanding the market’s potential to stay strong into the mid-February timeframe as some strategists believe, the data seems to suggest that “whenever there are two million or more call contracts that exchange hands on the Cboe, future 5- and 10-day returns tend toward being negative (about -1.37% and -2.12% respectively),” SpotGamma said.
SpotGamma added: “This is, in part, because the bullish hedging impact of short-dated call options activity is not long-lasting. Also, IV compressing from a relatively low starting point also does little to bolster long-lasting rallies.”
As further validation for the precariousness the market is in, “[t]he most prominent feature of the 0DTE landscape is actually customer-bought calls way out at $4,200.00 (which would ramp up buying from dealer long-gamma if SPX were to rise to ~$4,170.00.” Per SpotGamma, should “traders’ interest build at or slightly above current SPX prices, then dealers’ hedging may actually result in range suppression or pressure” as time passes and volatility falls. That’s because if a long call option’s probability of finishing in the money at expiration falls, the dealer’s risk falls as well and, so, the dealer can sell some of their hedges. This is market pressure.
As this letter stated, yesterday, knowing that longer-dated SPX IVOL “is cheap, now attractive trades include selling rich call verticals to finance put verticals.”
Per Joseph Wang, the “increasing probability of a second bout of inflation, an issue in the 1970s that the Fed is keen to avoid … [by] retighten[ing] financial conditions … through its balance sheet,” the flow of capital out of capital markets presents more pressure on the financial economy (not necessarily the real economy). Cheap put protection may help hedge the realization of further macro-type market pressure.
As of 8:15 AM ET, Friday’s regular session (9:30 AM – 4:00 PM ET), in the S&P 500, is likely to open in the upper part of a negatively skewed overnight inventory, inside of the prior range, suggesting a limited potential for immediate directional opportunity.
The S&P 500 pivot for today is $4,165.75.
Key levels to the upside include $4,189.00, $4,202.75, and $4,214.25.
Key levels to the downside include $4,153.25, $4,136.75, and $4,122.50.
Disclaimer: Click here to load the updated key levels via the web-based TradingView platform. New links are produced daily. Quoted levels hold weight barring an exogenous development.
Graphic: 65-minute profile chart of the Micro E-mini S&P 500 Futures.
Definitions
Volume Areas: Markets will build on areas of high-volume (HVNodes). Should the market trend for a period of time, this will be identified by a low-volume area (LVNodes). The LVNodes denote directional conviction and ought to offer support on any test.
If participants auction and find acceptance in an area of a prior LVNode, then future discovery ought to be volatile and quick as participants look to the nearest HVNodes for more favorable entry or exit.
POCs: 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.
About
In short, Renato Leonard Capelj is an economics graduate working in finance and journalism.
Capelj spends most of his time as the founder of Physik Invest through which he invests and publishes daily analyses to subscribers, some of whom represent well-known institutions.
Separately, Capelj is an equity options analyst at SpotGamma and an accredited journalist interviewing global leaders in business, government, and finance.
Physik Invest’s Daily Brief is read by thousands of subscribers. You, too, can join this community to learn about the fundamental and technical drivers of markets.
Graphic updated 6:50 AM ET. Sentiment Risk-Off if expected /ES open is below the prior day’s range. /ES levels are derived from the profile graphic at the bottom of this letter. Levels may have changed since initially quoted; click here for the latest levels. SqueezeMetrics Dark Pool Index (DIX) and Gamma (GEX) with the latter calculated 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. Click to learn the implications of volatility, direction, and moneyness. Breadth reflects a reading of the prior day’s NYSE Advance/Decline indicator. The CBOE VIX Volatility Index (INDEX: VVIX) measure reflects the total attractiveness of owning volatility.
Fundamental
Apologies for the delayed send. Please be subscribed to our Substack to receive updates sooner every day!
Last week, we added to our discussion on the “non-linear shocks” keeping inflation above target. In short, these shifts are not good for portfolio constructions like 60/40.
Moreover, in a January 6 Credit Suisse (NYSE: CS) follow-up, Zoltan Pozsar provided what he thinks may be a more optimal portfolio construction: 20% cash, 40% stocks, 20% bonds, and 20% commodities.
“[T]his ain’t your parents’ global macro environment,” Pozsar put forth, adding that some of the crises impacting the stability of money stem from the crisis of inflation “driven by mother nature and geopolitics.” Consequently, central banks’ responses may not be good for risk assets.
Amid a re-shaping of global flows (i.e., lower demands for the US dollar and Treasury securities), the Federal Reserve (Fed) may focus on backstopping bonds; if the usual marginal buyer won’t buy, in the context of geopolitical events, Treasuries may be at risk of tailing in auctions, which could, then, drive volatility in equities, credit, and EM.
By the end of 2023, the solution may be quantitative easing (QE) under the guise of yield curve control (YCC); QE will happen in the context of dysfunction in the Treasury markets, and seek to “police swap spreads at high levels of interest rates, not depress yields [and] inflate risk assets.”
Technical
As of 6:45 AM ET, Tuesday’s regular session (9:30 AM – 4:00 PM ET), in the S&P 500, is likely to open in the lower part of a negatively skewed overnight inventory, outside of prior-range and -value, suggesting a potential for immediate directional opportunity.
Our S&P 500 pivot for today is $3,908.25.
Key levels to the upside include $3,926.50, $3,943.25, and $3,955.00.
Key levels to the downside include $3,891.00, $3,874.25, and $3,857.00.
Click here to load today’s key levels into the web-based TradingView platform. All levels are derived using the 65-minute timeframe. New links are produced, daily.
As a disclaimer, the S&P 500 could trade beyond the levels quoted in the letter. Therefore, you should load the above link on your browser for more relevant levels.
Graphic: 65-minute profile chart of the Micro E-mini S&P 500 Futures.
Definitions
Volume Areas: Markets will build on areas of high-volume (HVNodes). Should the market trend for long periods of time, it will be identified by low-volume areas (LVNodes). LVNodes denote directional conviction and ought to offer support on any test.
If participants auction and find acceptance in an area of a prior LVNode, then future discovery ought to be volatile and quick as participants look to HVNodes for favorable entry or exit.
POCs: 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.
MCPOCs: Denote areas where two-sided trade was most prevalent over numerous sessions. Participants will respond to future tests of value as they offer favorable entry and exit.
About
In short, an economics graduate working in finance and journalism.
Capelj spends most of his time as the founder of Physik Invest through which he invests and publishes daily analyses to subscribers, some of whom represent well-known institutions.
Separately, Capelj is an equity options analyst at SpotGamma and an accredited journalist interviewing global leaders in business, government, and finance.
