S&P 500 Futures
S&P 500 Futures
Week of Jan 29 2023

Week of Jan 29 2023

Market Wrap

EOW 04 - Benchmarks
EOW 04 - Benchmarks
SPX (D) - Trailing 12mo and +/- 1σ Expected Weekly Range (+/- 2.9% 3857.2 → 4087.5)
SPX (D) - Trailing 12mo and +/- 1σ Expected Weekly Range (+/- 2.9% 3857.2 → 4087.5)
VX Surface - RVOL Spreads - VVIX / VIX Ratio - Trailing 12mo
VX Surface - RVOL Spreads - VVIX / VIX Ratio - Trailing 12mo

Narratives

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Besides the obvious under-positioning dynamic, the key macro inputs behind the renewed re-risking confidence are about a re-pricing lower in left-tails and a re-pricing higher in right-tails. The Bank of Canada’s surprisingly explicit forward hold guidance (which accompanied Wednesday’s 25bps hike) is material for the macro vol compression story: they’re the first major central bank to transition from the prior outsized hikes to now into the final pause and reassess phase. That scenario is also potentially in play for the Fed after next week’s move which, obviously, is locked on 25bps. The consensus view is and was recession / trough / bottom in H1, before later we then see a Fed easing / market stabilizing and recovery in H2 mindset. Instead, resilient US services, labor and wages have helped to offset the obvious recession already underway in housing and manufacturing, while the outlook for global growth is being re-priced for the better in real-time. It’s early in the year; I think we see risk surprise to the upside, holding off the hard landing, before you get that come-to-Jesus moment sequenced thereafter — Charlie McElligott, Nomura
There’s no mystery as to what’s driving outsized gains for high-growth, long-duration equities. The dollar is more than 10% off its highs, and US real yields have tumbled dramatically. In other words, financial conditions are easing alongside receding inflation in the developed world, and that’s bolstering last year’s laggards - Nomura
There’s no mystery as to what’s driving outsized gains for high-growth, long-duration equities. The dollar is more than 10% off its highs, and US real yields have tumbled dramatically. In other words, financial conditions are easing alongside receding inflation in the developed world, and that’s bolstering last year’s laggards - Nomura
US M2 is now contracting on a YoY basis, curves are deeply (anomalously, even) inverted and multiple leading indicators seem to be screaming recession and hard landing. The comeback of speculative long-duration assets could reverse if oil and wages don’t cooperate, and the ‘soft landing’ narrative temporarily shifts in the coming weeks into a ‘no landing’ view - BofA
US M2 is now contracting on a YoY basis, curves are deeply (anomalously, even) inverted and multiple leading indicators seem to be screaming recession and hard landing. The comeback of speculative long-duration assets could reverse if oil and wages don’t cooperate, and the ‘soft landing’ narrative temporarily shifts in the coming weeks into a ‘no landing’ view - BofA
We’re not biting on this recent rally because our work and process are so convincingly bearish on earnings, neither of which hinges on the timing of, or any US economic recession in 2023. Instead, it’s all about margins and negative operating leverage. We expect new lows for the S&P, after which the bear market should come to an end later this quarter or early in Q2 - Morgan Stanley
We’re not biting on this recent rally because our work and process are so convincingly bearish on earnings, neither of which hinges on the timing of, or any US economic recession in 2023. Instead, it’s all about margins and negative operating leverage. We expect new lows for the S&P, after which the bear market should come to an end later this quarter or early in Q2 - Morgan Stanley

Week Ahead

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The U.S. Federal Reserve is expected to announce that it is speeding up the end of its pandemic-era bond purchases and signal a turn to interest rate increases next year as a guard against surging inflation. On the U.S. economic calendar, the Labor Department's closely watched employment report is scheduled for release on Friday. Nonfarm payrolls likely increased by 185,000 jobs in January, compared with a rise of 223,000 jobs in the month before. Unemployment rate likely gained 3.6% in January, following a 3.5% increase in December. The ADP National Employment report on Wednesday is expected to show private payrolls likely increased by 170,000 jobs in January. Job openings likely fell to 10.200 million in December from 10.458 million in the previous month, the Labor Department is set to report on Wednesday in its monthly Job Openings and Labor Turnover Survey, or JOLTS report. On Tuesday, the Employment Cost Index, the broadest measure of labor costs, likely rose 1.1% in the fourth quarter, after increasing 1.2% in the previous quarter. The Labor Department on Thursday is expected to report initial claims for state unemployment benefits likely increased 14,000 to a seasonally adjusted 200,000 in the week ended Jan. 28. The Conference Board on Tuesday is expected to report its consumer confidence index increased to 109 in January from 108.3 in December. On Thursday, the Commerce Department is expected to report factory orders likely rose 2.3% in December after dropping 1.8% in November. The Commerce Department on Wednesday is expected to report construction spending likely fell 0.1% in December, after climbing 0.2% in November. On Friday, the Institute for Supply Management is expected to report its non-manufacturing PMI likely climbed to 50.3 in January from 49.6 in December - Refinitiv
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Economic (UTC-5)
- TradingEconomics
- TradingEconomics
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Earnings
- TradingTerminal
- TradingTerminal

Earnings

MetricUpDnThis WeekPrior WeekBaselineBaseline TF
Forward 12-mo Estimate
🔴
225.02
225.23
230.43
September 30, 2022
Forward 12-mo PE
🔵
18
17.5
15.5
September 30, 2022
Nominal Earnings Yield
🔴
5.53
5.7
6.43
September 30, 2022

Options

MetricUpDnThis WeekPrior WeekNet CHG% CHG
Implied Volatility
🔴
16.5
17.56
-6.04
-6.04%
Call Skew
🔴
-4.5
-3.7
-0.8
-21.62%
GEX Flip
⚪️
4,002.5
3,962.5
40
1.01%
Total GEX
🔵
18,202,823,219
1,729,124,767
16,473,698,452
952.72%
Skew Adjusted GEX
🔵
5,211,468,288
495,048,421
4,716,419,867
952.72%
Put/Call Ratio
⚪️
1.94
1.92
0.02
1.04%
Gamma by Strike - @tradevolatility
Gamma by Strike - @tradevolatility
Gamma Change - @tradevolatility
Gamma Change - @tradevolatility
SPX Skew - @tradevolatility
SPX Skew - @tradevolatility
Open Interest for SPX - @tradevolatility
Open Interest for SPX - @tradevolatility

Futures

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March E-mini S&P 500 futures finished at a one month high of 4084.25 Friday, gaining 8.75. Across all maturities, the session saw 1,591,159 contracts done, with March volume coming in at 1,587,936. Total open interest added 9,236 (0.45%) to end the session with 2,054,986 outstanding. The March maturity increased 0.43%, or 9,236, to finish at 2,036,555.
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The Jan EW 3525 put saw the most changing hands with 17,500 contracts traded. In March options, the most actively traded call was the 4200 strike with 4,421 done, and the 4050 put leads with volume of 2,690. Option open interest is largest for the Feb EW3 100 calls at 28,786, and the March 3600 puts at 37,993.
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As measured by the 30-day at-the-money, implied volatility finished moderately down, off by 0.49% to close at a one week low of 16.32%. Historical volatility (30-day) ended the session at 18.17%, down by 0.0920%.
Larger
Larger TF (PRE-COVID HI → Present) BEARISH - The Q4 VAH 4085 sweep (up) scenario played out in its entirety, and concluded with a strong position of weekly close convergent with the LTF 2022 Supply Line. Initiative buyers are well positioned to target cessation of QTF 1TFD (≥ 4180 +2.34% and within +2σ weekly expected), but are facing eroding risk reward. Price acceptance > 4064.50(-0.48%) maintains scope to confirm a breakout above the Supply Line. Offering below introduces scope for retesting 4000 (-2.06%). Notice the proximity of the (weak) WLO 3963.25 (-2.96%) with the OCT HI 3955.75 pivot (-3.15%), now coincidental with the 200d MA (-3.12%). YTF and QTF remain synchronized 1TFD.
Intermediate
Intermediate TF (2022 → Present ) NEUTRAL - The ITF (up) trend configuration was reclaimed with a convincing breakout above WHI.1 4035.25 (-1.2%) → MVAH 4051 (-0.81%). The 4064.50 Ice Line (-0.48%) has been thrice tested, each resulting in a failure but with a higher LO (this time) in December, a bullish divergence. Breaking and holding above the DEC HI 4141.50 will resolve the 2-mo balance to the upside, and shift ITF bias to Bullish. That said, we are once again approaching extreme overbought and complacent conditions, which has preceded major turning points (see Pane 2). Until then, we remain well above the 1TFU MTF cessation point: JAN LO 3814.50 -6.6% vs. DEC HI 4141.50 +1.40% (< +1σ W).
Short TF (Trailing 8-weeks)
Short TF (Trailing 8-weeks) BULLISH - W4 featured a confirmed breakout above the prior 2-week balance. Friday’s closing rejection above the DEC Pullback HI 4090.75 was more than likely due to profit taking. Buyers must now defend the upcoming Bull Bear Zone (BBZ) 4057.25 → 4090.75. Otherwise, scope for sweeping back WVAL → 4000 is introduced (-2.06% and within -1σ W). Laggard long positioning and coincidental weak structure below could make for a fast “reversion to mean” road trip. Meanwhile WTF 1TFU ending point lies beyond -1σ (W); and buyers have regained firm control above the 8-week VPOC and GEX Flip Point 4002.50 (-2.00%).
TPO ETH v RTH (W3→W4)
TPO ETH v RTH (W3→W4) BULLISH - Maintaining bid > 4075.50 keeps buyers firmly in control in the shorter timeframe, and increases odds of extending WTF 1TFU > 4109.25 (+0.61%). Conversely, Friday’s neutral close and retrace off the WHI creates modest scope for initiative sellers to offer back into Thursday’s range. If so, responsive buying will be tested between WVAH 4075.50 → Weekly PB LO 4057.25 - which guards the remaining singles prints carried forward from W3 (Friday @January 20, 2023). A positive GEX regime remains in effect above 4000, and continues to project its volatility suppressing influence for now.

Bull v Bear

This Week (30d ATM 16.32% v 17.90% p)
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Bulls will seek to establish price acceptance > WHI 4109.25 (+0.61%) and ideally recapture the DEC HI 4141.50 (+1.4%) → FEB LO 4141.00. Upside: Q422 HI 4180 (+2.34%); 4200 (+ 2.83%); ‘22 YVAH 4243.50 (+3.9%) are within +2σ (W).
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Bears will seek to retrace and hold prior week value, ideally below 4057.25 and target a sweep to WVAL 4009.75 (-1.82%). Downside: 4000 (-2.06%); WLO 3963.25 (-2.96%); 200d MA 3957 (-3.12%); 50d MA 3943 (-3.46%) are within -2σ (W).
Last Week (4084.25 MAR23 +2.34%)
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Bulls will seek to recapture 4000, and ideally extend range > WHI 4035.25 (+1.17%) are within +1σ (W) expected. Upside: Q4 VAH 4085 (+2.42%); 4100 (+2.80%); DEC HI 4141.50 (+3.84% → extending MTF 1FU) are within +2σ (W).
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Bears will seek to defend 4000, and ideally offer below the 200d MA and flip GEX negative below 3962.50 (-0.65%). Downside: WVAL.1 3846.25 (-1.06%); 50d MA 3936 (-1.32%); WLO 3901.75 (-2.18%) are ≤ -1σ (W). $PUT Wall 3820 (-4.22%) marginally beyond -2σ (W) expected.

Indicators

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Markets
NameExcessUpDnLastPrior% CHGXS OptimismXS PessimismInverse
Current Year Performance
⚪️  Normal
🔵
6.34
3.89
62.98
15
-10
Average of All Years
⚫️  Index (N/A)
🔴
-0.8
-0.42
-90.48
0
0
Intermediate Term Optimism Index
🔴  Optimism
🔵
77
69
11.59
65
35
CRB Optix
⚪️  Normal
⚪️
48
49
-2.04
60
40
Bond Optix
🟢  Pessimism
🔴
32
38
-15.79
70
40
HYG Optix
⚪️  Normal
🔴
33.98
61.34
-44.6
80
20
US Dollar Optix
⚪️  Normal
⚪️
43
43
0
60
40
TED Spread
🔴  Optimism
🔴
0.14
0.19
-26.32
0.25
0.7
Crude Oil Optix
⚪️  Normal
⚪️
43
43
0
60
30
Gold Optix
⚪️  Normal
⚪️
54
53
1.89
70
30
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Positioning
NameExcessUpDnLastPrior% CHGXS OptimismXS PessimismInverse
VIX Put/Call Ratio
⚪️  Normal
🔵
0.55
0.48
14.58
0.35
0.75
Equity Put/Call Ratio
⚪️  Normal
🔴
0.51
0.91
-43.96
0.5
0.75
S&P E-Mini Hedgers Position
⚫️  Index (N/A)
🔴
202,765
231,163
-12.55
0
0
S&P E-Mini Large Spec Net
⚫️  Index (N/A)
🔵
-208,991
-226,818
7.96
0
0
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Sentiment
NameExcessUpDnLastPrior% CHGXS OptimismXS PessimismInverse
VIX Sentiment
🔴  Optimism
⚪️
2.69
2.67
0.75
2.75
3.25
Risk Appetite Index
🔴  Optimism
🔵
0.8
0.58
37.93
0.8
0.2
Short-Term Risk
⚪️  Normal
⚪️
7
7
0
8
2
Intermediate Term Risk
🔴  Optimism
🔵
8
7
14.29
7
3
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Volatility
NameExcessUpDnLastPrior% CHGXS OptimismXS PessimismInverse
VIX Term Structure
⚪️  Normal
⚪️
0.9
0.91
-1.1
0.8
1
Component Correlation
🟢  Pessimism
⚪️
0.64
0.67
-4.48
0.35
0.55
Gamma Exposure (x000)
⚪️  Normal
🔵
2,369,600
946,668
-99.79
4,000,000
1,000,000
Credit Default Swaps
⚫️  Index (N/A)
⚪️
431.98
446.1
-3.17
0
0
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Breadth
NameExcessUpDnLastPrior% CHG XS OptimismXS PessimismInverse
SPY Breadth (% > 50d MA)
🔴  Optimism
🔵
72.26
63.27
14.21
70
30
SPY Breadth (% > 200d MA)
⚪️  Normal
🔵
68.86
62.67
9.88
70
30
NYSE TRIN
⚪️  Normal
🔵
0.94
0.68
38.24
0.5
2
NYSE Advance Decline
⚫️  Index (N/A)
⚪️
686,072
682,843
0.59
0
0
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