Week of Dec 17 2023

Market Wrap

Weekly Benchmarks - @Koyfin

Weekly Factors vs. S&P 500 - @Koyfin

Weekly Performance - @Koyfin

Narratives

Investors and traders see no reason to try and fade the enormous FCI easing everything rally until there’s evidence of US economic tails realizing. Those hypothetical tails are, of course, an inflation re-acceleration tied to the read-through of a rekindled wealth effect for the services-driven economy, or a hard landing. To get a crash down, you need a beaucoup long positioning rebuild via call-buying / call gamma squeezing into a spot-up, vol-up market. At that point, the rally would be easy to tip over, as stability breeds instability via the excess deployment of leverage. After stretches during which spot equities and volatility rise together, the tower tends to collapse under the weight of its own delta, as you can’t fulfill higher highs and more upside vol demand forever — Charlie McElligott, Nomura

Cash (MMFs) was the biggest flows winner of 2023, but history suggests no imminent rush to the exits. Inflows to MMFs in the past four cycles continued on average 14 months after the last Fed hike. The last hike was in July, so the implied peak in money market fund AUM would be September of 2024 - Bank of America

CTAs capitulated out of their legacy short position in both G10 bonds and STIRS in aggregate with estimated $167 billion and $184 billion covering flows since their respective peak shorts on Oct 19 and Nov 6. Their cumulative notional position across each asset class is net long for the first time in 28 months - Nomura

Fed cuts next year could reignite structural inflationary forces. Record government deficits; high household savings, rising wages & record home prices; corporates cushioned by private credit and cash have been impervious to hikes. These metrics are 1-2 standard deviations above long-term norms - Bank of America

Week Ahead

In the United States, investors will closely monitor the personal income and outlays report. It is anticipated that the annual PCE price inflation slowed to 3% last month, marking the lowest rate since March 2021. The core rate is expected to ease to 3.4%, the lowest in over two years. However, the monthly figures are poised to show a slight increase, with the headline reading rising by 0.1% and the core by 0.2%. The report is also expected to reveal a 0.3% increase in personal spending and a 0.4% advance in income for the same period.

Moreover, durable goods orders are expected to rebound slightly from a 5.4% slump in October. Additionally, building permits and housing starts are anticipated to decline compared to the previous month, with new home sales potentially remaining near 2010 lows. However, there might be a slight rebound in new home sales and homebuilder sentiment.

Finally, attention will be focused on the final reading of Q3 GDP growth, Michigan consumer sentiment, CB consumer sentiment, Q3 current account, and the Philadelphia Fed Manufacturing Index. (Source: Trading Economics)

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Calendar (UTC-4)

- TradingEconomics

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Macro Dashboard

- @Koyfin

Earnings

Metric	UpDn	This Week	Prior Week	Baseline	Baseline TF
Forward 4-qtr Estimate	🔴	235.77	236.26	228.39	January 1, 2023
Forward 4-qtr PE	🔵	19.96	19.5	17.2	January 1, 2023
Nominal Earnings Yield	🔴	5.01	5.13	5.86	January 1, 2023

Options

Metric	UpDn	This Week	Prior Week	Net CHG	% CHG
SPX Implied Volatility	🔴	9.95	11.01	-1.06	-9.63%
SPX GEX Flip	🔵	4,612.5	4,557.5	55	1.21%
SPX Skew Adjusted GEX	🔴	-4,529,739,754	-3,840,835,577	-688,904,177	-17.94%
Equity Put/Call Ratio (CBOE)	🔴	0.53	0.56	-0.03	-5.36%
VIX Put/Call Ratio (CBOE)	🔴	0.22	0.61	-0.39	-63.93%
SPX/W Put/Call Ratio (CBOE)	🔵	1.48	1.25	0.23	18.4%

Skew-Adjusted Gamma by Strike - @tradevolatility

Skew-Adjusted GEX Trend - @tradevolatility

Implied Volatility Trend - @tradevolatility

Put/Call OI Trend - @tradevolatility

Futures

March E-mini S&P 500 futures settled at 4768.00 Friday, dropping 6.00, in lower trade across the board. Across all maturities, volume was 1,842,175, with March seeing 1,801,823 change hands. Total open interest shed 16,495, or 0.62%, to end the session with 2,656,745 outstanding. The March maturity fell by 0.84% (16,495) to finish at 2,124,136.

Option volumes were largest for the Dec E3A 4885 call (8,998) and the Dec E3A 4100 put (74,708). In Dec options, the most active call was the 4850 strike with 3,398 done, and the 4050 put leads with volume of 5,342. Option open interest is greatest for the Dec EW 4820 calls at 59,561, and the Dec E3A 4100 puts at 75,351.

E-mini S&P 500 implied volatility finished the day slightly lower as the 30-day at-the-money fell by 0.0732% to close the session at 9.94%, a twelve year low. Historical volatility (30-day) closed at 9.69%, off by 0.0828%, to a one month low. As it gained 0.0095% to a one month high, the spread between the 30-day constant maturity implied and the 30-day historical volatilities ended the session at 0.25%.

Higher TF (W → D) BULLISH - The FOMC dovish pivot catalyzed a powerful breakout above the 2022 Supply Line, fully restoring the Higher TF bullish configuration. The underlying S&P 500 is within ~2% from a new ATM. Maintaining price acceptance above Q323 HI positions back-adjusted ESH24 futures to retest the Q222 LH 4860.25, the final LH protecting ATH 5028.25. That said, back & filling risk has increased with the second structural gap (highlighted circles in Pane 2) located approximately at last week’s midpoint: 4722 (-0.96%). A loss of last week’s midpoint risks a deeper retrace into DEC value < 4700 (-1.42%).

Lower TF (3H → M30) BULLISH - Daily, Weekly, Monthly timeframes remain synchronized in a structurally bullish configuration. It’s also worth noting that Shorter TF value confirmed last week’s move with a prominent double-distribution HVN at fresh YTD highs. The bullish scenario is continuation of the vol-suppressing positive GEX regime > 4666. The bearish scenario is loss of WMID and downward continuation to the 4700 strike (likely to attract responsive buyers). No consideration for directional shorting absent without a DTF LH fractal followed by a confirmed Break of Structure below a subsequent LL.

Bull v Bear

This Week (30d ATM IV 9.94% v 30d RVOL 9.69%)
Bulls will seek to extend upside and price acceptance > WHI on a closing basis. Upside: Futures adjusted SPX ATH 4872 (+2.18%) is just beyond +1σ (W) 4837.50 (+1.46%).
Bears will seek to cause cessation of DTF 1TFU and recapture the WMID 4722 (-0.96%) on a closing basis. Downside: GEX Flip 4666 (-2.14%) is beyond -1σ (W) 4700 (-1.43%).

Last Week (4768 MAR24 +2.26%)
Bulls will seek to extend upside and price acceptance > WHI on a closing basis. Upside: Q323 HI 4734.50 is just beyond +1σ (W) 4728.50 (+1.46%). ESH24 Q222 LH 4860.25 is beyond +2σ (W) 4797 (+2.93%).
Bears will seek to cause cessation of WTF 1TFU and ideally recapture negative GEX < 4598.50 and within -1σ (W) 4538 (-1.42%). Downside Vol Trigger 4550 (-2.37%) is within -2σ (W) 4528 (-2.84%).

Indicators

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Markets

Name	Excess	UpDn	Last	Prior	% CHG	XS Optimism	XS Pessimism
Current Year Performance	🔴 Optimism	🔵	23.41	20.4	14.75	10	-10
Average of All Years	⚫️ Index (N/A)	🔴	7.34	7.65	-4.05	0	0
Intermediate Term Optimism Index	🔴 Optimism	🔵	87	79	10.13	65	35
CRB Optix	⚪️ Normal	⚪️	45	45	0	60	40
Bond Optix	⚪️ Normal	🔵	49	46	6.52	70	40
HYG Optix	⚪️ Normal	🔵	63.81	48.43	31.76	80	20
US Dollar Optix	⚪️ Normal	🔴	52	56	-7.14	60	40
BBB - AAA Corporate Bond Spread	⚫️ Index (N/A)	🔴	0.82	0.87	-5.75	0	0
Crude Oil Optix	⚪️ Normal	🔴	38	40	-5	60	30
Gold Optix	⚪️ Normal	🔴	57	59	-3.39	70	30

Seasonality Average v Current Year Performance

Intermediate Term OPTIX v CRB OPTIX

US Dollar v Corporate Bond Spread

S&P 500 Seasonality

Bonds v HYG OPTIX

Crude Oil v Gold OPTIX

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Positioning

Name	Excess	UpDn	Last	Prior	% CHG	XS Optimism	XS Pessimism
US Put / Call Option Volume	🔴 Optimism	🔴	0.68	0.78	-12.82	0.7	1
SPY Optix	⚪️ Normal	🔴	57.28	62.37	-8.16	80	20
Stock Bond Ratio	⚪️ Normal	🔴	-0.95	0.07	-1457.14	2	-2
GEX / Market Cap Ratio	⚪️ Normal	⚪️	0.12	0.12	0	0.15	0.05

VIX Put/Call Ratio v Equity Put/Call Ratio

S&P 500 E-Mini COT Trailing 13-weeks (Futures & Options) - CFTC.gov

Dow E-Mini COT Trailing 4-weeks (Futures & Options) - CFTC.gov

Stock / Bond Ratio v GEX / Market Cap Ratio

Nasdaq E-Mini COT Trailing 13-weeks (Futures & Options) - CFTC.gov

Russell E-Mini COT Trailing 4-weeks (Futures & Options) - CFTC.gov

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Sentiment

Name	Excess	UpDn	Last	Prior	% CHG	XS Optimism	XS Pessimism
Small Trader Put/Call Premium	⚪️ Normal	🔴	0.53	0.56	-5.36	0.4	0.6
Risk On/Off Index	🔴 Optimism	🔵	76.19	71.43	6.66	50	0
MOVE Index	🟢 Pessimism	🔴	115.75	121.65	-4.85	60	100
2y / 10y Yield Curve	⚫️ Index (N/A)	🔴	-53.59	-49.52	-8.22	0	0

VIX Sentiment v CSFB Fear Barometer

Risk On/Off Indicator Rollups

MOVE Index v 2/10 Yield Curve

Risk On/Off Indicator Rollups

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Volatility

Name	Excess	UpDn	Last	Prior	% CHG	XS Optimism	XS Pessimism
VIX Term Structure	⚪️ Normal	⚪️	0.81	0.81	0	0.8	1
Component Correlation	⚪️ Normal	⚪️	0.46	0.46	0	0.35	0.55
Gamma Exposure (x000)	🔴 Optimism	🔵	5,806,520	5,690,580	0	4,000,000	1,000,000
Credit Default Swaps	⚫️ Index (N/A)	🔴	367.23	401.91	-8.63	0	0

VIX Term Structure v S&P 500 Component Correlation

Gamma Exposure v CDX

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Breadth

Name	Excess	UpDn	Last	Prior	% CHG	XS Optimism	XS Pessimism
SPY Breadth (% > 50d MA)	🔴 Optimism	🔵	87.25	82.87	5.29	70	30
SPY Breadth (% > 200d MA)	🔴 Optimism	🔵	74.5	66.87	11.41	70	30
NYSE TRIN	⚪️ Normal	🔵	1.44	0.62	132.26	0.5	2
NYSE Advance Decline	⚫️ Index (N/A)	🔵	689,958	687,249	0.29	0	0

SPY Breadth % > 50d & 200d MA

NYSE TRIN v Advance/Decline Line

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Sources

Narratives - Heisenberg Report
Week Ahead - Trading Economics
Earnings - FactSet & LESG I/B/E/S
Options - tradingvolatility.net
Futures - CME Group
Indicators - Sundial Capital Research