Daily Brief | June 9, 2021

Daily commentary for U.S. broad market indices.

Market Commentary

Index futures in balance.

  • Manufacturing, tech bill is passed.

  • Ahead: Wholesale inventory data.

  • Indexes trade sideways overnight.

What Happened: U.S. stock index futures traded sideways overnight alongside the passage of a bill that bolsters U.S. manufacturing and technology initiatives.

At the same time, so-called meme stocks, like Clover Health, rocketed amid speculative commentaries on platforms like Reddit. This comes as risk metrics flash warnings ahead of the Fed’s annual meeting in Jackson Hole which, as discussed in prior commentaries, may mark a shift in policy tone.

Ahead is data on wholesale inventories and policy decisions by the Bank of Canada. 

What To Expect: Wednesday’s regular session (9:30 AM - 4:00 PM EST) in the S&P 500 will likely open inside of prior-range and -value, suggesting a limited potential for immediate directional opportunity. 

Adding, during the prior day’s regular trade, the best case outcome occurred, evidenced by responsive buying below balance, at the $4,208.25 high volume area (HVNode). This is significant because it suggested lower prices did not solicit initiative selling.

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

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).

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

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

Initiative Selling: Selling within or below the previous day’s value area.

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 $4,224.75 HVNode puts in play the $4,232.25 low volume area (LVNode) and $4,238.00 overnight high (ONH). Initiative trade beyond the ONH could reach as high as the $4,247.75 Fibonacci-derived price target.

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 $4,224.75 HVNode puts in play the $4,213.75 LVNode and $4,208.25 HVNode. If lower, participants ought to look for responses at the $4,198.75 and $4,177.25 HVNodes.

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).
Graphic: Physik Invest maps out the purchase of call and put options in the SPDR S&P 500 ETF Trust (NYSE: SPY), for Tuesday. Activity in the options market was primarily concentrated in short-dated tenors, in call strikes as high as $435.
Graphic: SHIFT search suggests participants were most interested in put strikes at and below current prices in the cash-settled S&P 500 Index (INDEX: SPX) and Nasdaq 100 Index (INDEX: NDX), Tuesday.

News And Analysis

Politics | Democratic, GOP House members pitch infrastructure. (BBG)

Energy | One password allowed hackers to disrupt Colonial Pipeline. (REU)

Politics | U.S. Senate passes sweeping bill to address China threat. (REU)

Economy | The World Bank sees the strongest rebound in 80 years. (BBG)

Economy | Surprise jump in U.S. wages gives inflation debate twist. (BBG)

Politics | Gig companies’ push for state worker laws faces division. (REU)

Economy | Delinquency rates inching closer to pre-COVID levels. (MND)

Politics | Hungary’s Orban calls global corporate tax plan absurd. (BBG)

COVID | Fauci urges U.S. vaccinations as harmful variant spreads. (BBG)


What People Are Saying


Innovation And Emerging Trends

Economy | Bottom 90% of Americans borrowing from the top 1%. (BBG)

FinTech | Man Group-Oxford quants say AI can predict stock moves. (BBG)

Technology | Price of batteries has declined by 97% over 30 years. (OWID)

Economy | Fed paying 0.00%. Such a deal. Depositors are flocking. (BBG)

Crypto | El Salvador passes a law to be 1st country to adopt BTC. (Axios)

Crypto | Hong Kong to explore digital currency, HKMA fintech plan. (SCMP)


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.