S&P 500 Futures
S&P 500 Futures
Week of Oct 08 2023

Week of Oct 08 2023

Market Wrap

EOW 40 - Benchmarks
EOW 40 - Benchmarks
SPX (D) - Trailing 12mo and +/- 1σ Expected Weekly Range (+/- 2.2% 4213.7 → 4403.5)
SPX (D) - Trailing 12mo and +/- 1σ Expected Weekly Range (+/- 2.2% 4213.7 → 4403.5)
VX Surface - RVOL Spreads - VVIX / VIX Ratio - Trailing 12mo
VX Surface - RVOL Spreads - VVIX / VIX Ratio - Trailing 12mo

Narratives

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As long as core-CPI doesn’t print at 0.1% or lower, then the path of least resistance will lead directly to 5.75% Fed funds. This read is based on:
  1. Following through on the September SEP will only serve to help the Fed’s credibility
  2. The government shutdown potential is high after November 17 (implying the upcoming meeting might be Powell’s best/only opportunity for a Q4 move)
  3. It’s in keeping with the Committee’s every-other-meeting cadence
  4. Recent Fedspeak has only reinforced the SEP forecast of 5.75% by year-end - Ian Lyngen and Ben Jeffery, BMO
Systematics accounted for the the vast majority of deallocation flows over the past three-month window. With exposure in the systematic space now much cleaner, the target vol universe could see meaningful exposure adds if the distribution of daily spot outcomes for the S&P can compress back into the +/- 50bps range -
Systematics accounted for the the vast majority of deallocation flows over the past three-month window. With exposure in the systematic space now much cleaner, the target vol universe could see meaningful exposure adds if the distribution of daily spot outcomes for the S&P can compress back into the +/- 50bps range - Nomura
3% US 10s torpedoed small-caps, retail and biotech, 4% undercut banks and REITs and 5% is now cracking high yield bonds, homebuilders, utilities and oil. Once recessionary bond and stock markets mutate into economic data, bonds rally big and should be the best performing asset class of H1 2024 -
3% US 10s torpedoed small-caps, retail and biotech, 4% undercut banks and REITs and 5% is now cracking high yield bonds, homebuilders, utilities and oil. Once recessionary bond and stock markets mutate into economic data, bonds rally big and should be the best performing asset class of H1 2024 - Bank of America
It’s worth noting that the bar is a little higher this reporting season. In the lead up to Q1 and Q2 earnings, analysts trimmed estimates, but for Q3, forecasts for EPS growth were generally flat. So, companies will still surprise to the upside, but we believe the magnitude will more than likely be smaller-
It’s worth noting that the bar is a little higher this reporting season. In the lead up to Q1 and Q2 earnings, analysts trimmed estimates, but for Q3, forecasts for EPS growth were generally flat. So, companies will still surprise to the upside, but we believe the magnitude will more than likely be smaller- Goldman Sachs

Week Ahead

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This is a big week for two big issues troubling the bond market, namely inflation and the US federal budget deficit. The BIG event will be September's CPI (Thursday). This time, September's PPI (Wednesday) will be released the day before instead of the day after the CPI. The headline inflation rates of both were inflated by energy prices, particularly gasoline prices.
  1. The core CPI will probably be inflated by an increase in heath insurance, which is a very funky and volatile component of the index. It was down 33.6% y/y during August while the more sensible PCED measure was up 3.3%.
  2. We are expecting that the CPI shelter inflation component will continue to moderate, offsetting some or all of the upticks in the other measures included in both the headline and core CPI. During August, the headline and core CPI inflation rates excluding shelter were only 2.0% and 2.2% y/y. In other words, they were already at the Fed's 2.0% target.
  3. The bond market's other major concern is the federal deficit. September's deficit (Thursday) is likely to show that it totaled $2.0 trillion during fiscal-year 2023, which ends in September. Excluding the pandemic years, that would be the widest fiscal-year deficit on record. And that's even though the economy has been growing.
  4. The biggest problem with this big problem is that Washington's net interest outlays rose to $633.7 billion over the past 12 months through August. It's doubled since July 2018. The average interest rate on the government's huge debt was 2.50%. The 2-year Treasury yield is over 5.00%. So this outlay will continue to grow faster than all the other major outlays and continue to widen the deficit in fiscal-year 2024 - Yardeni Research
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Calendar (UTC-4)
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- TradingEconomics
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US Macro
United States Economic Indicators
United States Economic Indicators

Earnings

MetricUpDnThis WeekPrior WeekBaselineBaseline TF
Forward 4-qtr Estimate
🔵
239.93
232.95
228.39
January 1, 2023
Forward 4-qtr PE
🔴
18
18.5
17.2
January 1, 2023
Nominal Earnings Yield
🔵
5.56
5.43
5.86
January 1, 2023

Options

MetricUpDnThis WeekPrior WeekNet CHG% CHG
SPX Implied Volatility
🔴
15.4
15.5
-0.1
-0.65%
SPX GEX Flip
🔴
4,357.5
4,402.5
-45
-1.02%
SPX Skew Adjusted GEX
🔵
-3,214,285,886
-10,181,376,713
6,967,090,827
68.43%
Equity Put/Call Ratio (CBOE)
🔴
0.68
0.73
-0.05
-6.84%
VIX Put/Call Ratio (CBOE)
🔴
0.52
0.91
-0.39
-42.86%
SPX/W Put/Call Ratio (CBOE)
🔴
1.23
1.35
-0.12
-8.89%
Skew-Adjusted Gamma by Strike -
Skew-Adjusted Gamma by Strike - @tradevolatility
Skew-Adjusted GEX Trend -
Skew-Adjusted GEX Trend - @tradevolatility
Implied Volatility Trend -
Implied Volatility Trend - @tradevolatility
Put/Call OI Trend -
Put/Call OI Trend - @tradevolatility

Futures

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Friday's E-mini S&P 500 market was higher over a sizable trading range, with the Dec contract higher by 50.75 (1.18%), to 4341.50, a one week high. Overall, a heavy 2,220,892 contracts were traded, with 2,216,456 done in Dec. Total open interest lost 15,310, or 0.72%, to 2,100,990. Dec fell by 16,344 (0.78%), finishing at 2,080,095.
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Option volumes were greatest for the Nov EW 4600 call (6,091) and the Oct E2A 3525 put (55,650). For Dec options, the 4400 calls were the most actively traded with 1,931 done, and the highest volume put was the 4000 strike with 2,366 contracts changing hands. Options with the largest open interest are the Oct EW3 100 call with 32,045, and the Oct E2A 3525 put with 57,197.
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E-mini S&P 500 implied volatility ended the day moderately down as the 30-day at-the-money dropped 0.82% to finish the session at 15.41%, a one week low. Gaining 0.40%, historical volatility (as measured by the 30-day) closed the session at 12.29%.
Higher TF (W → D)
Higher TF (W → D) NEUTRAL - The Yearly TF remains structurally bullish above of the Q322 Break of Structure (BoS): 4327.50. The BoS occurred during the Q223 breakout and signaled a Higher TF change of condition. Resistance was found at the next LH, Q222 4631. The market rotated and proceeded to backtest its BoS, by now convergent with the closely observed 40w/200d MA. This pullback was facilitated by a 3-mo countertrend during Q323, but the seeds for phase cessation may have been planted last week. No need to predict; WLO 4235.50 will be confirmed as being either weak or strong through forthcoming price action.
Lower TF (3H → M30)
Lower TF (3H → M30) NEUTRAL - Friday’s short-covering catalyzed rally was confirmed by volume and leaves the market well-positioned to trigger cessation of the Higher TF pullback phase with a Break of Structure above HH 4371.25 (+0.69%). If successful, trend reversal would be confirmed by establishing price acceptance back within the W38 VA, coinciding with the recapture of 4400, within +1σ (W) expected range. Conversely, failure to recapture 4400 keeps Lower TF sellers in control, and a loss of 4300 creates scope for new lows. The negative gamma regime remains in effect below 4391 (+1.14%) but with modest exposure.

Bull v Bear

This Week (30d ATM IV 15.41% v 30d RVOL 12.29%)
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Bulls will seek to break WHI and ideally HH 4371.25 (+0.69%) on a closing basis. Upside: Recapture 4400 (+1.35%) is within +1σ (W) 4432 (+2.08%). 50d MA 4455 (+2.61%) < +2σ (W) 4523.50 (+4.19%).
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Bears will seek to recapture 4300 (-0.96%) on a closing basis. Downside: WLO 4235.50 (-2.44%) is beyond -1σ (W) 4254.50 (-2.00%). 4200 (-3.26%) > -2σ (W) 4168 (-4.00%).
Last Week (4341.50 DEC23 -0.01%)
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Bulls will seek to recapture > WVAH 4317.25 and WHI 4383.50 (+1.34%) on closing basis. Upside: Recapture 4400 (+1.72%) is within +1σ (W) 4416 (+2.00%). 50d MA 4478 (+3.5%) < +2σ (W) 4507.
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Bears will seek to break < WVAL 4307.25 and ideally WLO 4277.00 (-1.12%) on a closing basis. Downside: 200d MA 4241 is within -1σ (W) 4238.50 (-2.01%). Q322 PB HI 4175 (-3.5%) > -2σ (W) 4152.

Indicators

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Markets
NameExcessUpDnLastPrior% CHGXS OptimismXS PessimismInverseIndex
Current Year Performance
🔴 Optimism
🔵
12.61
12.11
4.13
10
-10
Average of All Years
⚫️ Index (N/A)
🔴
1.78
2.02
-11.88
0
0
Intermediate Term Optimism Index
🟢 Pessimism
🔴
34
39
-12.82
65
35
CRB Optix
⚪️ Normal
🔴
46
47
-2.13
60
40
Bond Optix
🟢 Pessimism
🔴
17
20
-15
70
40
HYG Optix
⚪️ Normal
🔵
31.04
24.1
28.8
80
20
US Dollar Optix
🔴 Optimism
🔴
61
63
-3.17
60
40
BBB - AAA Corporate Bond Spread
⚫️ Index (N/A)
🔵
0.98
0.94
4.26
0
0
Crude Oil Optix
⚪️ Normal
🔴
56
63
-11.11
60
30
Gold Optix
⚪️ Normal
🔴
37
39
-5.13
70
30
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Positioning
NameExcessUpDnLastPrior% CHGXS OptimismXS PessimismInverseIndex
Equity Put/Call Ratio
⚪️ Normal
🔴
0.68
0.73
-6.85
0.5
0.75
VIX Put/Call Ratio
⚪️ Normal
🔴
0.52
0.91
-42.86
0.35
0.75
Stock Bond Ratio
🔴 Optimism
🔵
2.2
1.36
61.76
2
-2
GEX / Market Cap Ratio
🟢 Pessimism
🔵
0.03
0
Infinity
0.15
0.05
VIX Put/Call Ratio v Equity Put/Call Ratio
VIX Put/Call Ratio v Equity Put/Call Ratio
S&P 500 E-Mini COT Trailing 4-weeks (Futures & Options)
S&P 500 E-Mini COT Trailing 4-weeks (Futures & Options) - CFTC.gov
Dow E-Mini COT Trailing 4-weeks (Futures & Options)
Dow E-Mini COT Trailing 4-weeks (Futures & Options) - CFTC.gov
Stock / Bond Ratio v GEX / Market Cap Ratio
Stock / Bond Ratio v GEX / Market Cap Ratio
Nasdaq E-Mini COT Trailing 4-weeks (Futures & Options)
Nasdaq E-Mini COT Trailing 4-weeks (Futures & Options) - CFTC.gov
Russell E-Mini COT Trailing 4-weeks (Futures & Options)
Russell E-Mini COT Trailing 4-weeks (Futures & Options) - CFTC.gov
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Sentiment
NameExcessUpDnLastPrior% CHGXS OptimismXS PessimismInverseIndex
VIX Sentiment
⚪️ Normal
🔵
2.93
2.9
1.03
2.75
3.25
Risk Appetite Index
⚪️ Normal
🔴
0.44
0.48
-8.33
0.8
0.2
MOVE Index
🟢 Pessimism
🔵
126.64
113.55
11.53
60
100
2y / 10y Yield Curve
⚫️ Index (N/A)
🔵
-28.46
-47.66
40.29
0
0
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Volatility
NameExcessUpDnLastPrior% CHGXS OptimismXS PessimismInverseIndex
VIX Term Structure
⚪️  Normal
🔴
0.93
0.95
-2.11
0.8
1
Component Correlation
⚪️  Normal
🔵
0.38
0.37
2.7
0.35
0.55
Gamma Exposure (x000)
⚪️  Normal
🔵
1,304,730
112,627
-99.11
4,000,000
1,000,000
Credit Default Swaps
⚫️  Index (N/A)
🔵
492.12
480.56
2.41
0
0
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Breadth
NameExcessUpDnLastPrior% CHG XS OptimismXS PessimismInverseIndex
SPY Breadth (% > 50d MA)
🟢 Pessimism
🔵
18.16
15.54
16.86
70
30
SPY Breadth (% > 200d MA)
⚪️ Normal
🔴
38.55
40.76
-5.42
70
30
NYSE TRIN
⚪️ Normal
🔴
0.67
0.97
-30.93
0.5
2
NYSE Advance Decline
⚫️ Index (N/A)
🔴
678,971
681,689
-0.44
0
0
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Sources

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