Sai Kiran Vella
166 lines
7.6 KiB
Markdown
166 lines
7.6 KiB
Markdown
# Market News Analysis & Catalyst Screener
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A structured workflow for converting daily news into actionable trade ideas, validated by the screener's fundamental and market-adjusted analysis.
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---
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## 1. How This Fits Into the Screener Workflow
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```
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Daily News
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↓
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Catalyst Prompt (Section 2) → Generates tickers + bias + horizon
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↓
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market_screener (npm start) → Fundamental + Market-Adjusted scoring
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↓
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Validation (Section 4) → Is the fundamental thesis intact?
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↓
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Decision → Act / Monitor / Discard
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```
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**Key principle:** The screener doesn't tell you *when* to trade — catalysts do that. The screener tells you whether the *underlying business* supports the trade or whether you're purely momentum-chasing.
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---
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## 2. Catalyst Analysis Prompt
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Copy and paste this into your LLM daily. Provide it with 3–5 news headlines.
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> **Role:** You are a quantitative financial analyst specialising in catalyst-driven trading.
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>
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> **Task:** Analyse the provided news and map each story to the assets structurally forced to respond.
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>
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> **For each catalyst, identify:**
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> 1. **Type:** Macro (Fed, rates, GDP) | Sector (regulatory, supply chain, commodity) | Company (earnings, guidance, M&A)
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> 2. **Primary ticker:** The asset directly impacted.
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> 3. **Ripple-effect ticker:** A supply chain partner, direct competitor, or sector peer that moves *before* the market catches on. This is the alpha play.
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> 4. **Bias:** Bull or Bear — with a one-sentence mechanistic reason (not sentiment).
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> 5. **Horizon:** Short (1–5 days) | Medium (1–4 weeks) | Long (1+ quarter).
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> 6. **Sensitivity:** How exposed is this ticker to the catalyst?
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> - **5** — Direct revenue impact > 20% of annual sales
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> - **4** — Direct revenue impact 10–20%
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> - **3** — Indirect exposure via cost structure or supply chain
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> - **2** — Sector correlation, limited direct exposure
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> - **1** — Macro tailwind/headwind only
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>
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> **Constraints:**
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> - Exclude generic analyst upgrades and "market sentiment" stories.
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> - Only include events with a measurable impact on valuation or supply chain fundamentals.
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> - Do not suggest tickers with average daily volume below 500k.
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> - For Bear plays: require at least one of — elevated short interest (>5% of float), negative earnings revision trend, or sector rotation evidence.
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---
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## 3. Quantitative Impact Matrix
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Output from the prompt above. Log results here before running the screener.
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| Catalyst | Type | Primary | Ripple | Bias | Sensitivity | Horizon | Mechanics |
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| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
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| [Event] | Macro/Sector/Co. | [TICKER] | [TICKER] | Bull/Bear | 1–5 | Short/Med/Long | [One-line financial logic] |
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---
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## 4. Ripple-Effect Reference Map
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When a catalyst hits a primary ticker, these are the typical second-order targets by category.
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| Primary Event | Ripple Targets | Logic |
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| :--- | :--- | :--- |
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| **Semis beat** (NVDA, AMD) | TSMC, ASML, AMAT, KLAC | Fab capacity demand follows chip demand |
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| **Semis miss** | INTC, MU, WDC | Inventory builds at competitors |
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| **Cloud CapEx guidance up** (MSFT, GOOGL, AMZN) | EQIX, DLR (data center REITs), NFLX infra | Power + cooling demand, bandwidth |
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| **Oil supply shock** | XOM, CVX (Bull); DAL, UAL (Bear) | Energy input costs hit airlines directly |
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| **Fed rate hike** | TLT, IEF (Bear); XLF, BRK (Bull) | Long-duration bonds reprice; bank margins expand |
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| **Fed rate cut** | TLT, XLRE (Bull); XLF (Bear) | REITs re-rate; bank NIM compresses |
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| **Strong USD** | EEM, multinational exporters (Bear) | Revenue headwind for USD-earners abroad |
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| **Retail sales miss** | WMT, TGT (Bear); AMZN (neutral/Bull) | Discretionary demand shift to e-commerce |
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| **Pharma approval** | Competitor biotech (Bear) | Market share displacement |
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| **Cybersecurity breach (major)** | CRWD, PANW, FTNT (Bull) | Accelerates enterprise security spend |
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---
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## 5. Validation Checklist
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Before acting on a catalyst, run the tickers through the screener and answer:
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### For Bull plays:
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- [ ] Does it pass the **Market-Adjusted** analysis? (minimum bar — if not, it's pure momentum)
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- [ ] Does it pass **Fundamental** analysis? (if yes → Strong Buy conviction; if not → Speculation)
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- [ ] Is FCF yield positive? (sustains the business through the catalyst period)
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- [ ] Is D/E manageable? (high leverage + catalyst = binary outcome, size accordingly)
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- [ ] Is the 52-week position below 85%? (if near highs, the market may have priced it in)
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### For Bear plays:
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- [ ] Does it **fail both** analyses? (confirms the fundamental short thesis)
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- [ ] Is short interest > 5% of float? (existing agreement in the market)
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- [ ] Is the horizon realistic? (overvalued stocks can stay overvalued — Bear plays need a catalyst *timeframe*)
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### Horizon vs screener relevance:
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| Horizon | Use screener for... |
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| :--- | :--- |
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| Short (1–5 days) | Confirm the stock isn't already broken (avoid catching falling knives on longs) |
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| Medium (1–4 weeks) | Gate check — does fundamental quality support a re-rating? |
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| Long (1+ quarter) | Full weight on both analyses — you need the fundamentals on your side |
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---
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## 6. Current Market Regime Context
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> **This section should be refreshed from `npm start` output before each session.**
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The screener derives the current regime from live Yahoo Finance data on startup:
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| Signal | What it means for catalysts |
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| :--- | :--- |
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| **Rate Regime: HIGH** (10Y > 5%) | Long-duration trades are punished. Favour cash-generative, short-horizon plays. Short TLT, long XLF. |
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| **Rate Regime: NORMAL** (2–5%) | Standard playbook applies. |
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| **Rate Regime: LOW** (< 2%) | Growth and duration trades work. REITs and long bonds are viable longs. |
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| **Volatility: HIGH** (VIX > 25) | Position sizes down. Mean-reversion trades outperform momentum. |
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| **Volatility: NORMAL** (VIX 15–25) | Trend-following works. |
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| **Volatility: LOW** (VIX < 15) | Risk-on. Momentum and growth outperform. Watch for complacency reversals. |
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---
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## 7. Bear Catalyst Template
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A structured short thesis requires more rigour than a bull thesis. Use this template.
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> **Ticker:** [TICKER]
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>
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> **Catalyst:** [What event breaks the bull narrative?]
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>
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> **Fundamental support:**
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> - Fails screener gate: [which gate, e.g. "P/E 120x > inflated gate of 57x"]
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> - Trend: [revenue decelerating / margins compressing / FCF turning negative]
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>
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> **Market structure support (need at least one):**
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> - Short interest: [X% of float]
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> - Earnings revision trend: [# of downward revisions last 90 days]
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> - Sector rotation: [which sector ETF is seeing outflows]
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>
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> **Risk to thesis:** [What would invalidate the short — e.g. "earnings beat with raised guidance"]
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>
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> **Horizon:** [Short / Medium / Long]
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> **Stop:** [Price level or event that closes the trade]
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---
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## 8. Adding Catalyst Tickers to the Screener
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Edit `index.js` and add tickers from the Impact Matrix to the `tickers` array, then run:
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```bash
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npm start
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```
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The screener will score each ticker under both the **Market-Adjusted** and **Fundamental** lenses and open `screener-report.html` with the full breakdown. Cross-reference the Signal column with your catalyst thesis:
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| Signal | Catalyst interpretation |
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| :--- | :--- |
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| ✅ Strong Buy | Fundamental quality + catalyst momentum aligned. Highest conviction. |
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| ⚡ Momentum | Catalyst works in today's market but price is stretched on fundamentals. Respect the stop. |
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| ⚠️ Speculation | Pure catalyst play — fundamentals don't support it. Small size, tight stop. |
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| 🔄 Neutral | Catalyst may be already priced in. Wait for a better entry or skip. |
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| ❌ Avoid | Screener and catalyst are both negative. Only valid as a Bear trade. |
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