Categories
Commentary

Daily Brief For September 17, 2021

Market Commentary

Equity index futures trade sideways to lower.

  • Fed could hint at a stimulus taper.
  • Ahead: UoM consumer sentiment.
  • OPEX and a potential for volatility.

What Happened: U.S. stock index futures auctioned sideways to lower ahead of quadruple witching and news the Federal Reserve may hint at scaling back asset purchases next week. 

Ahead is data on University of Michigan consumer sentiment (10:00 AM ET).

Graphic updated 6:30 AM ET. Sentiment Neutral if expected /ES open is inside of the prior day’s range. 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. SHIFT data used for S&P 500 (INDEX: SPX) options activity approximation. 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: As of 6:30 AM ET, Friday’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, on weak intraday breadth and strong market liquidity metrics, the worst-case outcome occurred, evidenced by trade back toward the market’s most recent perception of value, the convergence of the $4,437.75 micro-composite point of control (MCPOC) and an anchored volume-weighted average price (VWAP).

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.

VWAP: 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.
Graphic: Divergent delta (i.e., committed buying 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), one of the largest ETFs that track the S&P 500 index, via Bookmap. The readings are supportive of responsive trade or balance (i.e., rotational trade that suggests current prices offer favorable entry and exit).

We’re carrying forward the presence of minimal excess at Wednesday’s regular trade low (RTH Low), after a test of a point of control (POC) and 50-day simple moving average (i.e., two visual levels likely paid attention to by short-term, technically-driven market participants who generally are unable to defend retests).

Balance-Break Scenarios Potentially In Play: A change in the market (i.e., the transition from two-time frame trade, or balance, to one-time frame trade, or trend) may occur.

Monitor for acceptance (i.e., more than 1-hour of trade) outside of the balance area. Rejection (i.e., return inside of balance) portends a move to the opposite end of the balance.

Further, the aforementioned trade is happening in the context of peak growth and a moderation in the economic recovery, heightened valuations, the prospects of stimulus reduction, as well as non-seasonally aligned flows, impactful options market dynamics, divergent sentiment, and fears of a mid-cycle transition.

Graphic: @pat_hennessy breaks down returns for the S&P 500, categorized by the week relative to OPEX. Based on his analysis, Pat sees that the “2 weeks prior to OPEX (e.g., 7/30/21 to 8/6/21 in this late-cycle) [have] been extremely bullish,” while “OPEX week returns peaked in 2016 and have trended lower since.”

According to SqueezeMetrics, coming into Thursday’s session, the steepness of the GammaVol (GXV) curve suggested there was no more risk to the upside than there was to the downside; “SPX upside needs a bunch of bought puts to throw on the bonfire. It would be bullish for SPX to have people buying SPX puts,” and that hasn’t happened yet.

Thereafter, the index crept back into range, past $4,450.00, before responding higher, into the close ahead of quadruple witching, during which SpotGamma believes participants are likely to “see a big chunk of SPX options expire on the open, and the balance of index/etf/stocks expire on the close. This should lead to a decent amount of volatility Friday and Monday ahead of the FOMC.”

Moreover, for today, given an increased potential for heightened volatility, participants may make use of the following frameworks.

In the best case, the S&P 500 trades sideways or higher; activity above the $4,481.75 high volume area (HVNode) puts in play the $4,510.00 low volume area (LVNode). Initiative trade beyond the LVNode could reach as high as the $4,526.25 HVNode and $4,550.00 overnight high (ONH).

In the worst case, the S&P 500 trades lower; activity below the $4,481.75 HVNode puts in play the $4,437.75 MCPOC. Initiative trade beyond the MCPOC could reach as low as the $4,425.25 minimal excess low and $4,393.75, another micro-composite point of control (MCPOC).

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 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.
Graphic: 65-minute profile chart of the Micro E-mini S&P 500 Futures updated 6:30 AM ET.

News And Analysis

Fed seen announcing bond taper in November, rate liftoff in 2023.

Invesco could merge with a State Street asset-management unit.

Food and Drug Administration weighing COVID-19 booster shots.

S&P analysis on Canada growth prospects in the coming decade.

Rising transportation expenses are companies’ big inflation hurdle

Wall Street influencers are making $500,000, above even bankers.

GM plans to idle factories longer amid problematic chip shortages.

What People Are Saying

About

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 finance and technology reporter. Some of his biggest works include interviews with 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.

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 September 16, 2021

Market Commentary

Equity index futures trade sideways to lower with commodities and yields.

  • Equity indices falling; SPX above 50-day.
  • Ahead are claims, retail sales, and more.
  • Positioning risks mount case for volatility.

What Happened: After a break higher, yesterday, U.S. stock index futures auctioned sideways to lower overnight as participants positioned themselves for an options expiry and upcoming data dumps.

Ahead is data on jobless claims (8:30 AM ET), retail sales (8:30 AM ET), Philadelphia Fed manufacturing survey (8:30 AM ET), and business inventories (10:00 AM ET).

Graphic updated 6:40 AM ET. Sentiment Neutral if expected /ES open is inside of the prior day’s range. 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. SHIFT data used for S&P 500 (INDEX: SPX) options activity approximation. 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: As of 6:40 AM ET, 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, on strong intraday breadth and middling market liquidity metrics, the best case outcome occurred, evidenced by the S&P 500 closing the session on a spike higher, away from value.

Spike Rules In Play: 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). 
Graphic: Divergent delta (i.e., non-committed buying 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), one of the largest ETFs that track the S&P 500 index, via Bookmap. The readings are supportive of responsive trade or balance (i.e., rotational trade that suggests current prices offer favorable entry and exit).

This is significant because of rejection, or a willingness not to transact at lower prices. We’re carrying forward the presence of minimal excess at Wednesday’s regular trade low (RTH Low), after a test of a prior untested point of control (VPOC) and 50-day simple moving average (i.e., two visual levels likely paid attention to by short-term, technically-driven market participants who generally are unable to defend retests).

Graphic: S&P 500 rotates between the 20- and 50-day simple moving average. Thus far, stronger sellers have not stepped up.

Further, the aforementioned trade is happening in the context of peak growth and a moderation in the economic recovery, heightened valuations, the prospects of stimulus reduction, as well as non-seasonally aligned inflows, impactful options market dynamics, divergent sentiment, and fears of a mid-cycle transition.

Graphic: @pat_hennessy breaks down returns for the S&P 500, categorized by the week relative to OPEX. Based on his analysis, Pat sees that the “2 weeks prior to OPEX (e.g., 7/30/21 to 8/6/21 in this late-cycle) [have] been extremely bullish,” while “OPEX week returns peaked in 2016 and have trended lower since.”

According to SqueezeMetrics, the steepness of the GammaVol (GXV) curve suggests there is no more risk to the upside than there is to the downside; “SPX upside needs a bunch of bought puts to throw on the bonfire. It would be bullish for SPX to have people buying SPX puts,” and that hasn’t happened yet.

In other words, the graphic “means that movement from 4450 to 4500 is very easy, … [a]nd now that we’re at 4480, it’s slippery back down to 4450.”

Moreover, for today, given an increased potential for heightened volatility and responsive trade, participants may make use of the following frameworks.

In the best case, the S&P 500 trades sideways or higher; activity above the $4,481.75 high volume area (HVNode) puts in play the $4,510.00 low volume area (LVNode). Initiative trade beyond the LVNode could reach as high as the $4,526.25 HVNode and $4,550.00 overnight high (ONH).

In the worst case, the S&P 500 trades lower; activity below the $4,481.75 HVNode puts in play the $4,449.50 spike base. Initiative trade beyond the spike base could reach as low as the $4,425.25 minimal excess low and $4,393.75 micro-composite point of control (MCPOC).

To note, the $4,481.75 HVNode corresponds with two anchored Volume Weighted Average Price (VWAP) levels, 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.

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 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 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.

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 updated 7:25 AM ET.

News And Analysis

How ‘OpEx’ is shaking up the third week of the month.

U.S. political noise to intensify but have limited impact.

Though COVID cases are falling, the deaths are rising.

Biden’s economic plan at risk of delays amid squabble.

China Evergrande onshore bond trading is suspended.

The Coinbase spat with SEC ups ante in a crypto fight.

The foreclosure rate at its lowest in over two decades.

Talking Options Greeks: Everything you need to know.

What People Are Saying

About

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 finance and technology reporter. Some of his biggest works include interviews with 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.

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 September 9, 2021

Editor’s Note: Daily market commentaries to pause until Thursday, September 16, 2021, due to travel commitments. A weekend commentary will be in your inbox earlier this week.

All the best, 

Renato

Market Commentary

Equity index futures trade lower with yields, dollar, and bitcoin. Most commodities were green.

  • Narratives around slower recovery rising.
  • Ahead is jobless claims data, Fed speak.
  • Positioning risks mounting case for lower.

What Happened: U.S. stock index futures auctioned lower overnight alongside narratives surrounding a slowed economic recovery and stimulus reductions. 

Ahead is data on jobless claims (8:30 AM ET), as well as Fed-speak by Bowman (1:00 PM ET) and Williams (2:00 PM ET).

Graphic updated 6:30 AM ET. Sentiment Neutral if expected /ES open is inside of the prior day’s range. 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. SHIFT data used for S&P 500 (INDEX: SPX) options activity approximation. 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: As of 6:30 AM ET, 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, on weak intraday breadth and divergent market liquidity metrics, the best case outcome occurred, evidenced by sideways trade at the $4,510.00 pivot, the low end of a recent consolidation (i.e., balance) area. 

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).

To note, participants had a tough time separating value and expanding range lower.

This is evidenced by the minimal excess at yesterday’s regular trade low (RTH Low), coupled with an overnight response at the 20-day simple moving average (i.e., a visual level likely paid attention to by short-term, technically-driven market participants). 

In other words, we’re carrying forward the difficulty participants had, in days prior, to moving prices out and away from balance. The path of least resistance – at least in prior trade – was not down; stronger sellers are not yet on board.

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.

Value-Area Placement: Perception of value unchanged if value overlapping. Perception of value has changed if value not overlapping (i.e., outside day). Delay action in the former case.
Graphic: 30-minute profile chart of the Micro E-mini S&P 500 Futures and market liquidity, via Bookmap, for the SPDR S&P 500 ETF Trust (NYSE: SPY). Notice the volume delta (CVD) or buying and selling power as calculated by the difference in volume traded at the bid and offer.
Balance-Break Scenarios In Play: A change in the market (i.e., the transition from two-time frame trade, or balance, to one-time frame trade, or trend) has occurred.

Though we expect sideways to lower trade – for the time being – we monitor for rejection (i.e., return inside of balance) which portends a move higher, to the opposite end of the balance.

Further, the aforementioned trade is happening in the context of peak growth and a moderation in the economic recovery, as well as non-seasonally aligned inflows, impactful options market dynamics, divergent sentiment, and fears of a mid-cycle transition.

The implications of these themes on price are contradictory

To elaborate, Morgan Stanley (NYSE: MS), Citigroup Inc (NYSE: C), and Goldman Sachs Group Inc (NYSE: GS) cautioned investors about equity outlooks. Of concern, in particular, is a rise in cases of the delta variant, tensions between inflation expectations and yields, as well as seasonality. 

Among other risks, as SqueezeMetrics summarizes, “[p]eople pretty much stopped buying S&P 500 puts [last] week. At the same time, people are overexposed to changes in VIX, and will be hurt more than usual if VIX starts moving up. Historically, this means SPX down, VIX up.”

Moreover, for today, given an increased potential for moderate volatility and responsive trade, participants may make use of the following frameworks.

In the best case, the S&P 500 trades sideways or higher; activity above the $4,495.00 high volume area (HVNode) pivot puts in play the $4,510.00 low volume area (LVNode). Initiative trade beyond the LVNode could reach as high as the $4,526.25 HVNode and $4,550.00 overnight high (ONH).

In the worst case, the S&P 500 trades lower; activity below the $4,495.00 HVNode puts in play the $4,481.75 HVNode. Initiative trade beyond the $4,481.75 HVNode could reach as low as the $4,454.25 LVNode and $4,427.00 untested point of control (VPOC).

Note the developing volume-weighted average price (VWAP) pinch. VWAP is 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. We look to buy above a flat/rising VWAP pinch. Sell below a flat/declining VWAP pinch.

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 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 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 updated 6:30 AM ET. 

News And Analysis

Traders rush to dump China tech stocks as gaming targeted again.

Decision Guide: The ECB counts risks in setting bond-buying pace.

Aluminum notches fresh 13-year high on supply woes and demand.

China’s zero-COVID approach will aggravate rising corporate risks.

Fauci: We don’t even have “modestly good control” over COVID-19.

Coinbase threat shows there’s a new cryptocurrency sheriff in town.

White House eyeing increased hacking around the coming holidays.

What People Are Saying

About

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 finance and technology reporter. Some of his biggest works include interviews with 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.

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 August 19, 2021

Market Commentary

Equity index futures continued yesterday’s late-day liquidation.

  • Chop-chop: Fed nears time to taper.
  • Busy morning in regards to releases.
  • Range is wide; volatility may persist.

What Happened: U.S. stock index futures auctioned lower overnight alongside the increased prospects of stimulus reduction in 2021.

Ahead is data on jobless claims (8:30 AM ET), Philadelphia Fed manufacturing index (8:30 AM ET), and the index of leading economic indicators (10:00 AM ET). 

Graphic updated 6:45 AM ET. Sentiment Risk-Off if expected /ES open is below the prior day’s range. See here for more on the Dark Pool Index (DPI) and Gamma (GEX). A higher DPI approximation is bullish. At the same time, the lower the GEX approximation, the more volatility. SHIFT data used for options activity approximation. Note that options flow is sorted by the call premium spent; if green and more positive then more was spent on call options. Breadth reflects a reading of the prior day’s Advance/Decline indicator. VIX reflects a current reading of the CBOE Volatility Index from 0-100.

What To Expect: As of 6:45 AM ET, Thursday’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 a higher potential for immediate directional opportunity.

Adding, during the prior day’s regular trade, on weak intraday breadth and market liquidity metrics, the worst-case outcome occurred, evidenced by a close below the $4,422.75 balance area high (BAH) and 20-day simple moving average (SMA).

This is significant because the BAH marked a go/no-go level on a prior breakout and the SMA – a metric that ought to solicit a response by short-term (i.e., technically driven) participants who may be unable to defend retests – broke. As a result of this failure, odds supported the move to the $4,365.25 balance area low (BAL), the lower end of the balance.

Gap Scenarios In Play: 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.

Further, the aforementioned trade is happening in the context of a shift in the tapering debate, ahead of the Jackson Hole Economic Policy Symposium August 26-28, 2021. This theme’s implications on price are contradictory; to elaborate, the summary of the late July Federal Open Market Committee (FOMC) meeting suggests an inclination to start reducing the pace of asset purchases this year.

Graphic: S&P Global unpacks Federal Reserve balance sheet hypotheticals.

As an aside, markets went on a historic tear over the past year or so given monetary frameworks and max liquidity, so to speak. Add in the growth of derivatives exposure and potential for offsides positioning, even the slightest reduction in the Federal Reserve’s balance sheet – the removal of liquidity – has the potential to prompt a cascading reaction that exacerbates underlying price movements.

As Kai Volatility’s Cem Karsan, in a conversation with me for a Benzinga article, said: “It’s not a coincidence that the mid-February to mid-March 2020 downturn literally started the day after February expiration and ended the day of March quarterly expiration. These derivatives are incredibly embedded in how the tail reacts and there’s not enough liquidity, given the leverage, if the Fed were to taper.”

Graphic: SpotGamma data suggests the cash-settled S&P 500 Index (INDEX: SPX) may open in short-gamma territory. To note, 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.

Moreover, for today, in light of higher volatility and responsive trade expectations – given overextension from value (i.e., fair prices for two-sided trade as derived from the volume profile) and a test of a key anchored volume-weighted average price (VWAP) – participants may make use of the following frameworks.

More On 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.
Graphic: SPDR S&P 500 Trust ETF (NYSE: SPY) flirts with key downside anchored VWAPs. A key downside level in SPY lies at $427.95, currently. 

In the best case, the S&P 500 trades sideways or higher; activity above the $4,381.75 low volume area (LVNode) pivot puts in play the $4,393.75 micro composite point of control (MCPOC). Initiative trade beyond the MCPOC could reach as high as the $4,411.75 high volume area (HVNode) and the aforementioned $4,422.75 BAH.

In the worst case, the S&P 500 trades lower; activity below the $4,381.75 low volume area (LVNode) puts in play the $4,365.25 BAL/LVNode. Initiative trade beyond the BAL/LVNode could reach as low as the $4,341.00 untested point of control (VPOC) and $4,315.25 HVNode.

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 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 updated 6:45 AM ET.

News And Analysis

Landlords from Florida to California are jacking up rents.

COVID vaccines are less effective against new variants.

UK Fintech market runs hot but fear of bubble premature.

Tencent warns of more China tech curbs after growth hit.

A closer look at the investment/speculative-grade divide.

US restaurants up prices to offset labor inflation, demand.

Disenchanted investors help drive the record gold prices.

A complete Fed balance sheet normalization years away.

What People Are Saying

About

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 finance and technology reporter. Some of his biggest works include interviews with 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.

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 August 13, 2021

Editor’s Note: Happy Friday! If you found today’s note helpful, consider sharing!

Market Commentary

Equity index futures are sideways to higher on light volume and poor structure.

  • Themes of inflation, jobs, and liquidity.
  • Ahead: Import Price Index, Sentiment.
  • Yields drop; Nasdaq 100 strengthens.

What Happened: U.S. stock index futures auctioned sideways to higher alongside a dip in yields after data revealed persistence in business-related inflationary pressures and a drop in jobless claims.

“While inflation has been the overarching theme this week, U.S. jobless data from yesterday highlighted the improving employment backdrop as well,” said Jim Reid, a strategist at Deutsche Bank AG (NYSE: DB) in London. “Yesterday’s U.S. producer prices surprised to the upside, highlighting the ongoing inflationary pressures from ever-rising commodity costs and supply chain bottlenecks.”

Ahead is data on the import price index (8:30 AM ET) and University of Michigan sentiment (10:00 AM ET).

Graphic updated 6:45 AM ET. Sentiment Risk-On if expected /ES open is above the prior day’s range. See here for more on the Dark Pool Index (DPI) and Gamma (GEX). A higher DPI approximation is bullish. At the same time, the lower the GEX approximation, the more volatility. SHIFT data used for options activity approximation. Note that options flow is sorted by the call premium spent; if green and more positive then more was spent on call options. Breadth reflects a reading of the prior day’s Advance/Decline indicator. VIX reflects a current reading of the CBOE Volatility Index from 0-100.

What To Expect: As of 6:45 AM ET, Friday’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 a higher potential for immediate directional opportunity.

Adding, during the prior day’s regular trade, on weak intraday breadth and market liquidity metrics, the best case outcome occurred, evidenced by trade above the $4,434.75 low volume area (LVNode). This is significant because the aforementioned advance and overnight gap occurred in the face of light volume, poor structure, and unsupportive breadth.

Gap Scenarios In Play: 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.
Graphic: Multi-timeframe analysis of the S&P 500, Nasdaq 100, and Russell 2000, as well as breadth metrics on the NYSE and Nasdaq exchanges.
Graphic: SPDR S&P 500 ETF Trust (NYSE: SPY) market liquidity via Bookmap.

Further, the aforementioned trade is happening in the context of liquidity concerns. This theme’s implications on price are contradictory; to elaborate, the gap between the rates of growth in the supply of money and the gross domestic product turned negative for the first time since 2018. 

“Put another way, the recovering economy is now drinking from a punch bowl that the stock market once had all to itself,” said Doug Ramsey, Leuthold Group’s chief investment officer.

Graphic: According to Bloomberg, “While stocks kept rising during frequent negative Marshallian K readings in the 1990s, the pattern since the 2008 global financial crisis — a period when the central bank was in what Ramsey calls a “perpetual crisis mode” — begs for caution.”

Moreover, for today, given expectations of middling volatility and responsive trade, amid Friday’s options expiration (OPEX), participants may make use of the following frameworks.

Options Expiration (OPEX): 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.

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

In the best case, the S&P 500 trades sideways or higher; activity above the $4,453.75 high volume area (HVNode) pivot puts in play the $4,459.75 overnight high (ONH). Initiative trade beyond the ONH could reach as high as the $4,470.75 and $4,483.75 Fibonacci extensions.

In the worst case, the S&P 500 trades lower; activity below the $4,453.75 HVNode pivot puts in play the $4,447.25 HVNode. Initiative trade beyond the HVNode could reach as low as the $4,439.00 untested point of control (VPOC) and $4,430.00, a visual low likely generated by short-term (i.e., technically driven) participants who may be unable to defend retests.

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 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 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 (below) the previous day’s value area.
Graphic: 65-minute profile chart of the Micro E-mini S&P 500 Futures updated 6:45 AM ET.

News And Analysis

Traders pile into tail-risk bets that Fed will not hike.

U.S. high yield default rate lowest start in 14 years.

The Treasury market keeps on humbling investors.

COVID downside risks are less than in prior waves.

What People Are Saying

About

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 finance and technology reporter. Some of his biggest works include interviews with 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.

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 June 1, 2021

Market Commentary

Index futures in price discovery.

  • Optimism around a recovery mounting.
  • Ahead: Data on manufacturing, OPEC.
  • Stock indexes traded higher overnight.

What Happened: U.S. stock index futures auctioned higher overnight ahead of data on U.S. manufacturing.

Graphic updated at 6:30 AM EST

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, on a gap outside of balance, suggesting a potential for immediate directional opportunity.

Balance-Break and/or Gap Scenarios: Monitor for acceptance (i.e., more than 1-hour of trade) outside of the balance area. 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 the prior week’s regular trade, the best case outcome occurred, evidenced by responsive trade after a breakout above the $4,177.25 high volume area (HVNode). This is significant because that HVNode marked a pivot (i.e., above = bullish, below = bearish) on the composite profile.

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

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.

Further, this bullish price action is happening in the face of supply chain uncertainties and rising inflation, fiscal and monetary tightening, COVID-19 concerns, political risks, and the like. 

However, research by JPMorgan Chase & Co (NYSE: JPM), as well as Goldman Sachs Group Inc (NYSE: GS), suggests equities are still in play. This thinking would help explain the increased interest in S&P 500 and Nasdaq 100 call options.

For today, participants can trade from the following frameworks. 

In the best case, the S&P 500 trades sideways or higher; activity above last Friday’s $4,217.75 overnight high (ONH) puts in play the $4,224.75 HVNode and $4,227.00 POC. Initiative trade beyond the two aforementioned signposts could reach as high as first the $4,238.00 overnight all-time high (ONH) and then, the $4,294.75 Fibonacci-derived price extension, a typical recovery target.

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. 

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

In the worst case, the S&P 500 trades lower; activity below the $4,217.75 ONH puts in play the $4,209.00 point of control (POC). Then, if lower, comes the $4,177.25 and $4,153.25 HVNode. On a cross of the $4,153.25 HVNode, the $4,122.25 HVNode and $4,071.00 POC come into play, also.

Graphic: 65-minute profile chart of the Micro E-mini S&P 500 Futures.
Graphic: SHIFT search suggests participants were becoming more interested in call strikes at and above current prices in the cash-settled S&P 500 Index (INDEX: SPX) and Nasdaq 100 Index (INDEX: NDX), last week.
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 prior. Activity in the options market was primarily concentrated in short-dated tenors, in strikes at and above $425.

News And Analysis

Markets | Meme stock AMC continues rally, jumping on a share sale. (CNBC)

Markets | Cyberattack hits the world’s largest meat processor units. (CNBC)

Politics | Buttigieg: mask mandates on planes are a matter of respect. (Hill)

Economy | Mortgage rates dip beneath 3% again, offering new savings. (Y!)

Economy | Inflation in the euro area climbed to 2% in the month of May. (BBG)

Energy | With oil majors under attack, OPEC’s hand has strengthened. (BBG)

Markets | Bitcoin is unlikely to escape regulation as authorities respond. (BBG)

Markets | Tesla’s vehicle price increases due to supply chain pressure. (REU)

What People Are Saying

Innovation And Emerging Trends

Markets | The 60/40 strategy needs a modern makeover to win skeptics. (BBG)

FinTech | Nasdaq: upstarts are forcing legacy banks to evolve and adapt. (NDAQ)

FinTech | Coinbase Institutional planning the launch of a prime brokerage. (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, 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

Weekly Brief For May 31, 2021

Market Commentary

Key Takeaways: Index futures in balance.

  • Best to assume the taper tantrum happened.
  • Ahead: Fed speak and data on employment.
  • Indices traded sideways-to-higher last week.

What Happened: Coming into the large May monthly options expiration (OPEX) and extended holiday weekend, U.S. stock index futures pinned, trading sideways-to-higher.

Options: If an option buyer was short (long) stock, he or she would buy a call (put) to hedge upside (downside) exposure. Option buyers can also use options as an efficient way to gain directional exposure.

Options Expiration (OPEX): 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. 

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.

Furthermore, looking back, the movement in price was both volatile and mechanical.

After a short covering-like rally toward $4,200.00, the S&P 500 was responsively bought and sold at key visual references, suggesting a dominance by short-term participants.

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

The technically-driven trade denotes a lack of interest by institutional participants, at record highs; supply chain uncertainties and rising inflation, fiscal and monetary tightening, COVID-19 concerns, political risks, and the like, are some of the emerging concerns larger participants are looking to price in.

Of all the above risks, inflation remains the hottest topic.

Generally speaking, inflation and rates move inversely to each other. Low rates stimulate demand for loans (i.e., borrowing money is more attractive). With the rapid recovery, though, market participants fear that rates will rise to protect the economy from overheating.

Higher rates have the potential to reduce the present value of future earnings, making stocks, especially those that are high growth, less attractive. 

To note, however, rates remain range-bound; rates on the 10 Year T-Note sit below their March high and are likely to continue higher, which the market may absorb

How may the market absorb a rise in rates? During the so-called Taper Tantrum, in the early 2010s, rates settled in a wide range, and equities rallied big. Adding, some strategists, like Kit Juckes of Societe Generale SA (OTC: SCGLY) suggest it may be best to assume a tantrum has already happened.

“U.S. 10-year yields rose from a low of 1.4% in 2012 to 3% during their tantrum. In this cycle, the rise has been from 0.5% to a high just below 1.8%. That’s comparable in relative terms. The eventual peak in U.S. yields in 2018 was 3.25%. Can’t we accept that the taper tantrum has already happened? The important difference is that in the tantrum cycle, core CPI never got above 2 ½%. A bet on further bond weakness is a bet on inflation proving to be stickier than the Fed can cope with.”

Adding, research by JPMorgan Chase & Co (NYSE: JPM), as well as Goldman Sachs Group Inc (NYSE: GS), suggests equities may be getting cheap with reflationary themes being the go-to play. This sentiment would help explain the increased interest in S&P 500 and Nasdaq 100 call options.

Graphic: Equity valuations at their cheapest, relative to the macro in March 2009 and in the depth of the 1982 recession, according to Goldman Sachs Group Inc (NYSE: GS), via The Market Ear.
Graphic: SHIFT search suggests participants were becoming more interested in call strikes at and above current prices in the cash-settled S&P 500 Index (INDEX: SPX) and Nasdaq 100 Index (INDEX: NDX), last week.
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 prior. Activity in the options market was primarily concentrated in short-dated tenors, in strikes at and above $425.

Outlier risks remain, though; aside from the seasonally weak period, S&P 500 skew – a measure of perceived tail risk and the chances of a black swan event – rose dramatically over the past few weeks. At the same time, sentiment cooled considerably, while individual stock volatility increased the potential for a repeat of the GameStop Corporation (NYSE: GME) de-risking event.

Graphic: Goldman Sachs Group Inc (NYSE: GS) unpacks outlier risks based on the implied volatility of S&P 500 out-of-the-money options, via The Market Ear.

What To Expect: In the coming sessions, participants will want to focus their attention on where the S&P 500 trades in relation to the $4,197.25 high volume area (HVNode).

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.

That said, participants can trade from the following frameworks.

In the best case, the index trades sideways or higher; activity above $4,197.25 has the potential to reach the $4,227.00 point of control (POC). Initiative trade beyond the POC could reach as high as first the $4,238.00 overnight all-time high (ONH) and then, the $4,294.75 Fibonacci-derived price extension, a typical recovery target. 

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. 

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

In the worst case, the index trades lower; activity below the $4,177.25 HVNode puts in play the $4,153.25 HVNode, first. Thereafter, if lower, the $4,122.25 HVNode and $4,071.00 POC come into play. 

On a cross through the $4,050.75 low volume area (LVNode), long-biased traders should beware of a rapid liquidation, as low as first the $4,015.00 and $4,001.00 POCs. In such a liquidation, odds favor a test of ~$3,970.00 50.00% retracement, as well as the $3,918.00 61.80% retracement and HVNode.

Graphic: 4-hour profile chart of the Micro E-mini S&P 500 Futures.
Graphic: Weekly candlestick charts of the S&P 500 (top left), Nasdaq 100 (top right), Russell 2000 (bottom left), and Dow Jones Industrial Average (bottom right). Nasdaq is primed for upside and has the potential to pull the S&P with it. 

News And Analysis

Trade | One of the world’s top ports expects delays on an outbreak. (BBG)

Markets | PBOC raises reserve ratio for foreign exchange holdings. (BBG)

Economy | Recovery solidifies in U.S., Europe, while EM faces risks. (Moody’s)

Markets | China bars banks from selling commodity-linked products. (REU)

Economy | Fed security purchases draw fire in hot U.S. housing market. (S&P)

Energy | Global oil demand is seen eclipsing India, Iran’s uncertainty. (S&P)

Economy | U.S. won’t experience stagflation over next few years. (Moody’s)

Economy | Non-government loans seeing a jump in forbearances. (MND)

Economy | U.S. speculative-grade corporate default rate to fall to 4%. (S&P)

Markets | Inflation, higher oil, stronger yuan point in same direction. (BBG)

Economy | U.S. retailers face headwinds from slowing sales, inflation. (S&P)

Markets | Everyone with bonds to liquidate had ample time to do so. (BBG)

What People Are Saying

Innovation And Emerging Trends

Markets | How recent growth in leveraged finance affects investors. (BZ)

Politics | Tech growth overshadowed by regulatory risks, challenges. (S&P)

Markets | Chamath: SPACs need more oversight and regulation. (BBG)

Politics | China moves to a three-child policy to boost its birthrate. (BBG)

Markets | Shakeout stirs debate over ether’s long-term potential. (BBG)

FinTech | Which banks are positioned for low rates, digital adoption. (S&P)

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 10, 2021

Market Commentary

Index futures in balance.

  • Inflation talk; reflation back in play.
  • Ahead is Fed speak and earnings.
  • Indices divergent. Expecting chop.

What Happened: U.S. stock index futures were divergent. 

The S&P 500 and Dow Jones Industrial Average discovered higher prices while the Nasdaq 100 and Russell 2000 backed off into the prior range.

Graphic updated at 7:25 AM EST.

What To Expect: Monday’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 session’s regular trade, the best case outcome occurred, evidenced by initiative trade above the $4,210.75 rally-high, which is significant because that was the highest mark achieved during a prior failed break from balance.

This comes as market participants double down on the so-called “reflation” trade. JPMorgan Chase & Co (NYSE: JPM) strategists, led by Marko Kolanovic, warned many managers will “need to quickly switch gears from their deflationary playbook or risk an ‘inflation shock,’” according to Bloomberg.

Beyond that snippet of fundamental information, we move to what matters right now, technically. Further, for today, participants can trade from the following frameworks. 

In the best case, the S&P 500 trades sideways or higher; activity above the $4,238.00 overnight high (ONH) puts in play the $4,266.50 Fibonacci-derived price extension.

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

In the worst case, the S&P 500 trades lower; activity below the $4,216.00 low-volume area (LVNode) puts in play the $4,210.75 rally-high. Thereafter, if lower, the HVNodes at $4,199.25, $4,190.75, and $4,177.25 (a major pivot) all become in play.

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: 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: 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 May 7, 2021. Activity in the options market was primarily concentrated in short-dated tenors, in strikes as low as $404.00, which corresponds with $4,030.00 in the cash-settled S&P 500 Index (INDEX: SPX).

News And Analysis

Commodities | Gasoline futures rise after cyberattack shuts down a vital pipeline. (CNBC)

Recovery | Dr. Fauci says masks could become seasonal after COVID pandemic. (CNBC)

Economy | Euro zone investor morale rises to the highest level since March 2018. (REU)

Markets | Second-biggest cryptocurrency ethereum breaks $4,000 to hit a record. (REU)

Economy | Consumer on one of the healthiest footings in decades, post-COVID-19. (BLK)

What People Are Saying

Innovation And Emerging Trends

Business | UBS dangles $40,000 bonuses to slow junior banker defections. (BBG)

FinTech | Signalling privacy is coming to DeFi, Sienna Network raises $11.2M. (TC)

Trade | Japan mulling alternatives to Suez Canal after the Ever Given shock. (AJ)

ESG | Blackrock insider explains how the ESG investing ‘fantasy’ is distracting. (FP)

Markets | Nasdaq gets the green light from SEC for volatility index options. (TTN)

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.