S&P 500 Futures
S&P 500 Futures
Week of May 21 2023

Week of May 21 2023

Market Wrap

EOW 20 - Benchmarks
EOW 20 - Benchmarks
SPX (D) - Trailing 12mo and +/- 1σ Expected Weekly Range (+/- 2.3% 4095.5 → 4288.3)
SPX (D) - Trailing 12mo and +/- 1σ Expected Weekly Range (+/- 2.3% 4095.5 → 4288.3)
VX Surface - RVOL Spreads - VVIX / VIX Ratio - Trailing 12mo
VX Surface - RVOL Spreads - VVIX / VIX Ratio - Trailing 12mo

Narratives

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With the increased issuance to come after the debt ceiling is lifted we expect the front-end of the T-bill curve to come under pressure. The sharp rise in collateral should pressure repo rates higher. Many of the same factors that caused SOFR to rise well above the Fed’s target range in September 2019 are lining up again this year. The confluence of factors blamed for the September 2019 incident were: 1) bill settlements and the mid-September tax date pulling liquidity out of the market; 2) the end of the Fed hiking cycle and continuation of QT; 3) hedge funds using the repo market to fund Treasury cash-futures basis trades; and 4) bank balance sheet constraints. Suffice it to say all of these factors could be repeated this fall as the Treasury ramps up bill issuance in September, the Fed has likely reached its terminal rate but QT continues, the “hedge fund trade with a history of blowups is back again” and the regional banking stress that is forcing banks into a defensive stance is making regulatory relief on leverage and liquidity ratios very unlikely — Subadra Rajappa, SocGen
The June deadline is unusual in that the budget is in deficit for the first half of the month but will run a surplus in the second half, so there could be as little as a few days in June when the Treasury cannot make payments. But the last thing Yellen wants is to give lawmakers an excuse to further procrastinate.
The June deadline is unusual in that the budget is in deficit for the first half of the month but will run a surplus in the second half, so there could be as little as a few days in June when the Treasury cannot make payments. But the last thing Yellen wants is to give lawmakers an excuse to further procrastinate. While some corners of the financial markets are pricing in debt limit-related risks, the effect on the equity market as a whole appears modest; this is likely in part due to the fact that market participants assume a deal will happen until they have a clear reason to change that assumption - Goldman Sachs
AI is just a baby bubble. It barely registers on our history chart. Whether bubbles inflate for the right or wrong reasons, they’re always started by easy money and always ended by rate hikes. Fundamentals mean diddly-squat in a speculative bubble.
AI is just a baby bubble. It barely registers on our history chart. Whether bubbles inflate for the right or wrong reasons, they’re always started by easy money and always ended by rate hikes. Fundamentals mean diddly-squat in a speculative bubble. If AI is the new internet and if the Fed is making a mistake by pondering a pause, Treasury yields would tell you as much by rising back above 4% and staying there. If that happens, we most certainly haven’t seen the last rate hike of the cycle. In other words, the biggest pain trade over the next 12 months is Fed funds at 6% not 3% - Bank of America
When you have so much risk-prem built into assets and over-hedging for event risk, a potential surprise right-tail outcome slingshots strong reversal flows (selloffs in Treasurys and gold and an unwind in puts on the equities side, as well as buy flows from dealers covering short hedges they no longer need into spot rallies). And none of this means risk disappears once the US decides not to default.
When you have so much risk-prem built into assets and over-hedging for event risk, a potential surprise right-tail outcome slingshots strong reversal flows (selloffs in Treasurys and gold and an unwind in puts on the equities side, as well as buy flows from dealers covering short hedges they no longer need into spot rallies). And none of this means risk disappears once the US decides not to default. The CRE land mine is still there; prices fell in Q1 for the first time in a decade, and half the fund managers we polled see CRE as the most likely source of a credit event - Bank of America

Week Ahead

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In the US, investors will be closely following the debt ceiling negotiations. Hopes for a quick deal were dashed on Friday after Republican negotiators walked out of a meeting, stating that the White House demands were unreasonable. Attention will also be given to the Fed meeting minutes and speeches by several Fed officials. Expectations for another rate hike increased during the week due to strong data, but on Friday, Fed Chair Powell stated that it might be unnecessary to raise rates to curb inflation because of stress in the banking sector. Additionally, several important data releases will occur, including personal outlays and income data, durable goods orders, flash PMI data from S&P Global, and new and pending home sales. Consumer spending is anticipated to rise slightly in April following a period of stagnation the previous month, while orders for US-manufactured durable goods are likely to decline after a notable rise in March. Furthermore, traders will be closely monitoring the advance estimate of wholesale inventories, and second estimates of first-quarter GDP figures. Regional activity indexes, such as the Richmond Fed Manufacturing Index, Chicago Fed National Activity Index, and Kansas Fed Manufacturing Index, will also be under scrutiny. As the earnings season unfolds, several prominent companies will report their financial results, including Zoom, Intuit, Palo Alto Networks, XPeng, NVIDIA, Snowflake, Medtronic, and Costco Wholesale - TradingEconomics
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Calendar (UTC-4)
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- TradingEconomics
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Major Economies
-TradingEconomics
-TradingEconomics

Earnings

MetricUpDnThis WeekPrior WeekBaselineBaseline TF
Forward 12-mo Estimate
🔴
224.38
224.61
228.39
January 1, 2023
Forward 12-mo PE
🔴
18.6
18.7
17.2
January 1, 2023
Nominal Earnings Yield
🔴
5.35
5.47
5.86
January 1, 2023

Options

MetricUpDnThis WeekPrior WeekNet CHG% CHG
SPX Implied Volatility
🔴
13.6
13.69
-0.09
-0.66%
SPX GEX Flip
🔵
4,147.5
4,127.5
20
0.48%
SPX Skew Adjusted GEX
🔵
14,846,030,036
-1,620,815,867
16,466,845,903
1,016%
Equity Put/Call Ratio (CBOE)
🔴
0.56
0.7
-0.14
-20%
VIX Put/Call Ratio (CBOE)
🔴
0.47
0.49
-0.02
-4.08%
SPX/W Put/Call Ratio (CBOE)
⚪️
1.38
1.38
0
0%
OEX Put/Call Ratio (CBOE)
🔵
3.91
0.22
3.69
1,677.27%
Net Skew-Adjusted Gamma by Strike -
Net 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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June E-mini S&P 500 futures settled at 4204.75 Friday, down by 7.25, in lower trade across the board. Overall, 1,720,441 contracts were traded, with 1,713,351 done in June. Combined open interest closed the session at a one month high of 2,401,148, higher by 5,771, or 0.24%. June open interest rose by 4,237 (0.18%), to 2,360,685.
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The May E4A 3625 put saw the most changing hands with 12,852 contracts done. In June options, the most actively traded call was the 4300 strike with 5,766 changing hands, and the 4200 put leads with volume of 5,794. Option open interest is highest for the June EW3 100 calls at 36,655, and the May E4A 3475 puts at 64,141.
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As measured by the 30-day at-the-money, implied volatility ended moderately up, gaining 0.56% to close the session at 10.81%. Historical volatility (30-day) finished the day at 12.87%, higher by 0.0185%, to a one week high.
Longer TF (W → D)
Longer TF (W → D) NEUTRAL - During W20, the market tested the February high of 4208.50, which was arguably overdue given Nasdaq leadership. However, buyers were unable to sustain the momentum, and the breakout above this threshold remains unconfirmed having closed marginally below. Looking at the bigger picture, the current bullish trend is a pullback relative to the larger timeframe (bearish) Q322 HI 4327.50 → 2022 LO 3502 structure, albeit with much reduced volatility. Now that price has retraced above fair value, the emergence of larger timeframe sellers en-route to 4300 is more likely.
Shorter TF (3H → M30)
Shorter TF (3H → M30) BULLISH - We observe a shorter timeframe Change of Character on the 3H and Internal Break of Structure at 4212 on the M30 timeframes, respectively. Taken together this price action signals the possible start of a higher timeframe pullback - which manifests as a counter-trend on shorter timeframes. Unmitigated demand zones are evident below 4169.50, which will likely attract responsive action. Overall, the odds favor maintaining the bullish swing structure above WLO.1 4111.75 (-2.21%) despite event risks. WTF and DTF are also now synchronized 1TFU (bullish).

Bull v Bear

This Week (30d ATM 10.81% v 13.27% p)
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Bulls will seek to break WHI 4227.25 on a closing basis and continue to build price acceptance above. Upside: > Q421 LO BOS 4260 (+1.31%) is within +1σ (W) 4289 (+2.00%).
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Bears will seek to break PLO < 4191.50 and ideally the 4172.50 swing low on a closing basis. Downside: < WLO 4120 (-2.02%); WLO.1 4111.75 (-2.21%) are beyond -1σ (W) 4123.50 (-1.93%).
Last Week (4204.75 JUN23 +1.61%)
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Bulls will seek to break WHI 4167.00 and ideally recapture WHI.1 4206.25. Upside: > YTD HI 4208.50 (+1.7%); HH 4217.25 (+1.92%) are within +1σ (W) 4222.25 (+2.04%).
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Bears will seek to extend 1TFD < WLO 4111.75 on a closing basis. Downside: < 4100(-0.92%); APR LO 4068.75 (-1.67%); WLO.1~50d MA 4062.25 (-1.83%) are within -1σ (W) 4057 (-1.96%).

Indicators

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Markets
NameExcessUpDnLastPrior% CHGXS OptimismXS PessimismInverseIndex
Current Year Performance
⚪️ Normal
🔵
9.62
7.98
20.55
10
-10
Average of All Years
⚫️ Index (N/A)
🔵
2.31
2.09
10.53
0
0
Intermediate Term Optimism Index
⚪️ Normal
🔵
64
55
16.36
65
35
CRB Optix
⚪️ Normal
🔴
45
46
-2.17
60
40
Bond Optix
🟢 Pessimism
🔴
23
34
-32.35
70
40
HYG Optix
⚪️ Normal
🔵
39.85
18.96
110.18
80
20
US Dollar Optix
⚪️ Normal
⚪️
49
49
0
60
40
BBB - AAA Corporate Bond Spread
⚫️ Index (N/A)
🔵
1.06
1.05
0.95
0
0
Crude Oil Optix
⚪️ Normal
🔴
37
38
-2.63
60
30
Gold Optix
⚪️ Normal
🔴
57
60
-5
70
30
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Positioning
NameExcessUpDnLastPrior% CHGXS OptimismXS PessimismInverseIndex
Equity Put/Call Ratio
⚪️ Normal
🔴
0.56
0.7
-20
0.5
0.75
VIX Put/Call Ratio
⚪️ Normal
🔴
0.47
0.49
-4.08
0.35
0.75
LOBO Put/Call Ratio
⚪️ Normal
🔴
0.85
1.02
-16.67
0.65
1.1
Options Speculation Index
🔴 Optimism
🔵
1.21
1.05
15.24
1.15
0.9
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
S&P 500 Futures Hedgers Position v Large Spec Net
S&P 500 Futures Hedgers Position v Large Spec Net
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
🔴
2.84
2.9
-2.07
2.75
3.25
Risk Appetite Index
⚪️ Normal
🔵
0.71
0.67
5.97
0.8
0.2
MOVE Index
🟢 Pessimism
🔵
127.51
120.52
5.8
60
100
2y / 10y Yield Curve
⚫️ Index (N/A)
🔴
-59.75
-53.1
-12.52
0
0
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Volatility
NameExcessUpDnLastPrior% CHGXS OptimismXS PessimismInverseIndex
VIX Term Structure
⚪️  Normal
🔵
0.84
0.82
2.44
0.8
1
Component Correlation
⚪️  Normal
⚪️
0.52
0.52
0
0.35
0.55
Gamma Exposure (x000)
⚪️  Normal
🔵
2,458,600
1,639,420
100
4,000,000
1,000,000
Credit Default Swaps
⚫️  Index (N/A)
🔴
492.9
496.74
-0.77
0
0
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Breadth
NameExcessUpDnLastPrior% CHG XS OptimismXS PessimismInverseIndex
SPY Breadth (% > 50d MA)
⚪️ Normal
🔵
50.89
47.71
6.67
70
30
SPY Breadth (% > 200d MA)
⚪️ Normal
🔵
50.3
49.1
2.44
70
30
NYSE TRIN
⚪️ Normal
🔴
1.05
1.33
-21.05
0.5
2
NYSE Advance Decline
⚫️ Index (N/A)
🔵
680,585
679,768
0.15
0
0
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Sources

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