Week of May 12 2024

Market Wrap

Weekly Benchmarks - @Koyfin

Weekly Factors vs. S&P 500 - @Koyfin

Weekly Performance - @Koyfin

Sentiment

The general outlook is cautiously optimistic for equities, with a preference for value/cyclicals over growth and high dividend yielders. Positioning is shifting away from extreme bearishness, and sentiment is improving. Liquidity conditions are mixed, with potential volatility ahead. Key bullish catalysts include a Fed pivot to easing and a rebound in the Chinese economy, while key bearish catalysts include sticky inflation and geopolitical tensions. Key support levels for equities are 4800-4600 on the S&P 500, and key reversal thresholds for rates are 4.25% on the 10Yr and 4.45% on the 30Yr. Left tail risks include a Fed policy error and a bursting of the AI bubble, while right tail risks include a goldilocks economic scenario and a surge in retail inflows. The distribution of outcomes is positively skewed, with right tail risks more likely, but volatility and drawdowns are acknowledged — Claude 3 Opus (Sources: Yardeni Research, Bank of America, Goldman Sachs, Fundstrat, Nomura, Oppenheimer)

June-August is the second strongest three-month period of the year for all years going back to 1928 with US stocks having risen 65% of the time looking back nearly a century, average +3.2% with the seasonal even stronger during fourth year election cycles - Bank of America

IG bond funds have enjoyed seven months of uninterrupted AUM growth. Spreads are now inside of 90bps and the outperformance to beleaguered government bonds is the most pronounced in 100 years. But, should Treasurys start outperforming credit, risk assets will look toppy - Bank of America

Skew flattened anew as opportunistic selling of vol expansions eventually overwhelmed the impetus to hedge equity downside. Vol-of-vol cratered to a decade low, the clearest expression of the disappearing demand for left-tail protection, while upside demand has firmed back up - Nomura

Week Ahead

In the US, investors are eyeing the April CPI report to gain insights into the development of price pressures in the economy. The CPI is expected to rise by 0.3% from March, slightly lower than the 0.4% increase in the previous month. The core monthly rate is also projected to decrease to 0.3% from 0.4%.

Moreover, the PPI data is anticipated to show a 0.2% increase in both headline and core producer prices, consistent with March's figures. Other noteworthy economic indicators include retail sales, expected to reveal a slower consumer spending rate of 0.4%. Industrial production, the NY Empire State Manufacturing Index, business inventories, the Philadelphia Fed Manufacturing Index, housing starts, and building permits will also be closely watched.

Investors will also pay attention to comments from various Fed officials, particularly Chair Powell's speech at the Annual General Meeting of the Foreign Bankers' Association in Amsterdam on Tuesday, for hints on the timing of potential interest rate cuts.

On the corporate front, quarterly earnings reports from Home Depot, Cisco Systems, Walmart, Applied Materials, and Deere & Company are also scheduled - (Source: TradingEconomics)

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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	🔴	252.99	253.25	243.98	January 1, 2024
Forward 4-qtr PE	🔵	20.6	20.2	20.16	January 1, 2024
Nominal Earnings Yield	🔴	4.85	4.94	5.19	January 1, 2024

Options

Metric	UpDn	This Week	Prior Week	Net CHG	% CHG
SPX Implied Volatility	🔴	10.67	11.83	-1.16	-9.81%
SPX GEX Flip	🔵	5,177.5	5,122.5	55	1.07%
SPX Skew Adjusted GEX	🔴	-2,180,655,443	-133,616,235	-2,047,039,208	-1,532.03%
Equity Put/Call Ratio	⚪️	0.6	0.6	0	0%
VIX Put/Call Ratio	🔴	0.51	0.79	-0.28	-35.44%
SPX/W Put/Call Ratio	🔵	1.38	1.37	0.01	0.73%

Skew-Adjusted Gamma by Strike - @tradevolatility

Skew-Adjusted GEX Trend - @tradevolatility

Implied Volatility Trend - @tradevolatility

Put/Call OI Trend - @tradevolatility

Futures

June E-mini S&P 500 futures finished at a one month high of 5246.25 Friday, up 7.25. Combined volume was a light 1,115,151, with the June contract seeing 1,112,925 change hands. Total open interest rose 1,681 (0.0819%) to end the session with 2,054,190 outstanding. The June maturity increased 0.0407%, or 1,681, to finish at 2,018,360.

The May E3C 4400 put saw the most changing hands with 39,145 contracts done. In May options, the most active call was the 5250 strike with 5,193 traded, and the 4175 put leads with volume of 7,779. Options with the greatest open interest are the May EW3 5400 call with 53,934, and the May E3C 4500 put with 40,067.

As measured by the 30-day at-the-money, implied volatility closed the day down, dropping 0.26% to end at a one month low of 10.49%. Down by 0.0045%, historical volatility (as measured by the 30-day) finished the session at 13.19%. The volatility spread (30-day, IV-HV) closed the day at a one month low of -2.69%, having fell by 0.2597%.

Higher TF (W → D) NEUTRAL - The recapture and acceptance above the 50d MA 5185 (-1.17%) further supports the completion of the April correction. The question now is whether the market is entering a multi-month trading range (4963.50 → 5333.50), or whether the pullback with quickly flag the next leg up to new highs. Risks for equities have notably dissipated from geopolitics to earnings to the Fed path to the macro for rates and seasonals, but the technical nature of price action suggests systematic flows remain predominantly in play. For now, odds favor completing an April value area sweep, and buyers remain in control > WLO 51555.75 (-1.73%).

Lower TF (4H → M30) BULLISH - W19 range expansion facilitated the completion of the higher timeframe correction with odds now favoring a retest of 5300 (+1.02%). But the coming +1σ weekly expected range (+1.49%) coincides with the mitigation of prominent multi-week fair value gap, where resistance is likely. Conversely, 5200 → 5225, offers an assorted convergence of FVG/HVN/WVPOC to attract support into the Tues → Wed Powell/PPI/CPI event catalysts. Buyers will seek to establish price acceptance above WVAH 5243 to facilitate the continued ascent of weekly value, but the re-established positive GEX regime also inherently limits upside.

Bull v Bear

This Week: 30d ATM IV 10.49% v 30d HV 13.19% -2.70%
Bulls will seek to establish price acceptance > WVAH 5243 and ideally extend WTF 1TFU. Upside: >5300 (1.02%) is within +1σ (W) 5324 (+1.49%).
Bears will seek to recapture DTF 1TFD and ideally 5200 (-GEX transition) on a closing basis. Downside: FVG 5168.50 is coincidental with -1σ (W) 5170 (-1.45%).

Last Week: 5246.25 JUN24 +1.78%
Bulls will seek to extend WTF 1TFU and price acceptance above the 50d MA 5164 on a closing basis. Upside: 5200 (0.88%) is within +1σ (W) 5237 (+1.60%).
~~Bears will seek to recapture DTF 1TFD and ideally the 5100 gap on a closing basis. Downside: WLO 5036.25 (-2.30%) is~~ ~~beyond~~ ~~-1σ (W) 5075 (-1.55%).~~

Indicators

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Markets

Name	Excess	UpDn	Last	Prior	% CHG	XS Optimism	XS Pessimism
Current Year Performance	⚪️ Normal	🔵	9.49	7.5	26.53	10	-10
Average of All Years	⚫️ Index (N/A)	🔴	3.05	3.21	-4.98	0	0
Intermediate Term Optimism Index	🔴 Optimism	🔵	70	62	12.9	65	35
CRB Optix	⚪️ Normal	🔵	50	49	2.04	60	40
Bond Optix	⚪️ Normal	🔵	51	48	6.25	70	40
HYG Optix	⚪️ Normal	🔴	42.03	79.51	-47.14	80	20
US Dollar Optix	⚪️ Normal	🔵	45	43	4.65	60	40
BBB - AAA Corporate Bond Spread	⚫️ Index (N/A)	🔴	0.7	0.71	-1.41	0	0
Crude Oil Optix	⚪️ Normal	🔴	46	48	-4.17	60	30
Gold Optix	⚪️ Normal	🔵	68	64	6.25	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	⚪️ Normal	🔴	0.77	0.79	-2.53	0.7	1
SPY Optix	⚪️ Normal	🔴	65.85	73.47	-10.37	80	20
Stock Bond Ratio	⚪️ Normal	🔵	1.39	1.16	19.83	2	-2
GEX / Market Cap Ratio	⚪️ Normal	🔵	0.1	0.08	25	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	🔴	0.56	0.62	-9.68	0.4	0.6
Risk On/Off Index	🔴 Optimism	🔵	76.19	66.67	14.28	75	25
MOVE Index	⚪️ Normal	🔴	94.23	95.96	-1.8	60	100
2y / 10y Yield Curve	⚫️ Index (N/A)	🔴	-37.13	-31.25	-18.82	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	🔴	0.86	0.88	-2.27	0.8	1
Component Correlation	🔴 Optimism	⚪️	0.34	0.34	0	0.35	0.55
Gamma Exposure (x000)	🔴 Optimism	🔵	5,432,040	4,044,560	25	4,000,000	1,000,000
Credit Default Swaps	⚫️ Index (N/A)	🔴	336.2	338.83	-0.78	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)	⚪️ Normal	🔵	57.68	43.2	33.52	70	30
SPY Breadth (% > 200d MA)	🔴 Optimism	🔵	77.91	73.24	6.38	70	30
SPY Net High-Low%	⚪️ Normal	🔵	7.15	3.98	79.65	10	-10
NYSE Advance Decline	⚫️ Index (N/A)	🔵	706,268	703,417	0.43	0	0

SPY Breadth % > 50d & 200d MA

SPY Net High-Low% v Advance/Decline Line

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Sources

Narratives - Heisenberg Report
Week Ahead - Trading Economics
Earnings - FactSet & LESG IBES
Options - tradingvolatility.net
Futures - CME Group
Indicators - Sundial Capital Research