market_screener/prompts/catalyst-analysis.md

Market News Analysis & Catalyst Screener

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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1. How This Fits Into the Screener Workflow

Daily News
    ↓
Catalyst Prompt (Section 2)  →  Generates tickers + bias + horizon
    ↓
market_screener (npm start)  →  Fundamental + Market-Adjusted scoring
    ↓
Validation (Section 4)       →  Is the fundamental thesis intact?
    ↓
Decision                     →  Act / Monitor / Discard

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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2. Catalyst Analysis Prompt

Copy and paste this into your LLM daily. Provide it with 3–5 news headlines.

Role: You are a quantitative financial analyst specialising in catalyst-driven trading.

Task: Analyse the provided news and map each story to the assets structurally forced to respond.

For each catalyst, identify:

1. Type: Macro (Fed, rates, GDP) | Sector (regulatory, supply chain, commodity) | Company (earnings, guidance, M&A)
2. Primary ticker: The asset directly impacted.
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.
4. Bias: Bull or Bear — with a one-sentence mechanistic reason (not sentiment).
5. Horizon: Short (1–5 days) | Medium (1–4 weeks) | Long (1+ quarter).
6. Sensitivity: How exposed is this ticker to the catalyst?
   • 5 — Direct revenue impact > 20% of annual sales
   • 4 — Direct revenue impact 10–20%
   • 3 — Indirect exposure via cost structure or supply chain
   • 2 — Sector correlation, limited direct exposure
   • 1 — Macro tailwind/headwind only

Constraints:

• Exclude generic analyst upgrades and "market sentiment" stories.
• Only include events with a measurable impact on valuation or supply chain fundamentals.
• Do not suggest tickers with average daily volume below 500k.
• 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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3. Quantitative Impact Matrix

Output from the prompt above. Log results here before running the screener.

Catalyst	Type	Primary	Ripple	Bias	Sensitivity	Horizon	Mechanics
[Event]	Macro/Sector/Co.	[TICKER]	[TICKER]	Bull/Bear	1–5	Short/Med/Long	[One-line financial logic]

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4. Ripple-Effect Reference Map

When a catalyst hits a primary ticker, these are the typical second-order targets by category.

Primary Event	Ripple Targets	Logic
Semis beat (NVDA, AMD)	TSMC, ASML, AMAT, KLAC	Fab capacity demand follows chip demand
Semis miss	INTC, MU, WDC	Inventory builds at competitors
Cloud CapEx guidance up (MSFT, GOOGL, AMZN)	EQIX, DLR (data center REITs), NFLX infra	Power + cooling demand, bandwidth
Oil supply shock	XOM, CVX (Bull); DAL, UAL (Bear)	Energy input costs hit airlines directly
Fed rate hike	TLT, IEF (Bear); XLF, BRK (Bull)	Long-duration bonds reprice; bank margins expand
Fed rate cut	TLT, XLRE (Bull); XLF (Bear)	REITs re-rate; bank NIM compresses
Strong USD	EEM, multinational exporters (Bear)	Revenue headwind for USD-earners abroad
Retail sales miss	WMT, TGT (Bear); AMZN (neutral/Bull)	Discretionary demand shift to e-commerce
Pharma approval	Competitor biotech (Bear)	Market share displacement
Cybersecurity breach (major)	CRWD, PANW, FTNT (Bull)	Accelerates enterprise security spend

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5. Validation Checklist

Before acting on a catalyst, run the tickers through the screener and answer:

For Bull plays:

• Does it pass the Market-Adjusted analysis? (minimum bar — if not, it's pure momentum)
• Does it pass Fundamental analysis? (if yes → Strong Buy conviction; if not → Speculation)
• Is FCF yield positive? (sustains the business through the catalyst period)
• Is D/E manageable? (high leverage + catalyst = binary outcome, size accordingly)
• Is the 52-week position below 85%? (if near highs, the market may have priced it in)

For Bear plays:

• Does it fail both analyses? (confirms the fundamental short thesis)
• Is short interest > 5% of float? (existing agreement in the market)
• Is the horizon realistic? (overvalued stocks can stay overvalued — Bear plays need a catalyst timeframe)

Horizon vs screener relevance:

Horizon	Use screener for...
Short (1–5 days)	Confirm the stock isn't already broken (avoid catching falling knives on longs)
Medium (1–4 weeks)	Gate check — does fundamental quality support a re-rating?
Long (1+ quarter)	Full weight on both analyses — you need the fundamentals on your side

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6. Current Market Regime Context

This section should be refreshed from npm start output before each session.

The screener derives the current regime from live Yahoo Finance data on startup:

Signal	What it means for catalysts
Rate Regime: HIGH (10Y > 5%)	Long-duration trades are punished. Favour cash-generative, short-horizon plays. Short TLT, long XLF.
Rate Regime: NORMAL (2–5%)	Standard playbook applies.
Rate Regime: LOW (< 2%)	Growth and duration trades work. REITs and long bonds are viable longs.
Volatility: HIGH (VIX > 25)	Position sizes down. Mean-reversion trades outperform momentum.
Volatility: NORMAL (VIX 15–25)	Trend-following works.
Volatility: LOW (VIX < 15)	Risk-on. Momentum and growth outperform. Watch for complacency reversals.

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7. Bear Catalyst Template

A structured short thesis requires more rigour than a bull thesis. Use this template.

Ticker: [TICKER]

Catalyst: [What event breaks the bull narrative?]

Fundamental support:

• Fails screener gate: [which gate, e.g. "P/E 120x > inflated gate of 57x"]
• Trend: [revenue decelerating / margins compressing / FCF turning negative]

Market structure support (need at least one):

• Short interest: [X% of float]
• Earnings revision trend: [# of downward revisions last 90 days]
• Sector rotation: [which sector ETF is seeing outflows]

Risk to thesis: [What would invalidate the short — e.g. "earnings beat with raised guidance"]

Horizon: [Short / Medium / Long] Stop: [Price level or event that closes the trade]

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8. Adding Catalyst Tickers to the Screener

Edit index.js and add tickers from the Impact Matrix to the tickers array, then run:

npm start

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:

Signal	Catalyst interpretation
✅ Strong Buy	Fundamental quality + catalyst momentum aligned. Highest conviction.
⚡ Momentum	Catalyst works in today's market but price is stretched on fundamentals. Respect the stop.
⚠️ Speculation	Pure catalyst play — fundamentals don't support it. Small size, tight stop.
🔄 Neutral	Catalyst may be already priced in. Wait for a better entry or skip.
❌ Avoid	Screener and catalyst are both negative. Only valid as a Bear trade.