S&P 500 Futures
S&P 500 Futures
Week of Sep 10 2023

Week of Sep 10 2023

Market Wrap

EOW 36 - Benchmarks
EOW 36 - Benchmarks
SPX (D) - Trailing 12mo and +/- 1σ Expected Weekly Range (+/- 1.7% 4381.8 → 4533.4.)
SPX (D) - Trailing 12mo and +/- 1σ Expected Weekly Range (+/- 1.7% 4381.8 → 4533.4.)
VX Surface - RVOL Spreads - VVIX / VIX Ratio - Trailing 12mo
VX Surface - RVOL Spreads - VVIX / VIX Ratio - Trailing 12mo

Narratives

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Higher-for-longer oil, USD, yields and tighter financial conditions remain the September / October risk for risk assets and raise the hard landing probability in the next six months. If there’s a negative payrolls print this fall that serves to ease financial conditions via lower yields and a weaker dollar (on Fed easing bets), we would sell any accompanying rally. There’s no doubt that a negative NFP print or another credit event could send yields tumbling; but the bond vigilantes still see a bloated US federal budget deficit, surging US government debt and elevated government expenditures globally for public sector investment, infrastructure, rearmament and net zero commitments — Michael Hartnett, Bank of America
If you use the 10-year median and exclude mega-cap tech, the S&P isn’t actually trading all that rich. Elevated real yields will likely prevent further multiple expansion, but the balance of risks around our year-end S&P target is to the upside as market participants could convince themselves that the highs are in for yields. In a hypothetical scenario where reals fall 25bps and the real yield gap is unchanged, there’s scope for the S&P to trade up to 4,675 -
If you use the 10-year median and exclude mega-cap tech, the S&P isn’t actually trading all that rich. Elevated real yields will likely prevent further multiple expansion, but the balance of risks around our year-end S&P target is to the upside as market participants could convince themselves that the highs are in for yields. In a hypothetical scenario where reals fall 25bps and the real yield gap is unchanged, there’s scope for the S&P to trade up to 4,675 - Goldman Sachs
Our EPS forecasts for this year and next are on the bullish end of the distribution. But uncertainty around the trajectory of inflation could make for a bumpy ride. We 
Our EPS forecasts for this year and next are on the bullish end of the distribution. But uncertainty around the trajectory of inflation could make for a bumpy ride. We do expect MoM core CPI prints to temporarily re-accelerate, and consumption may slow in Q4 as student loan payments and higher mortgage rates bite. At the same time, Goldman’s sentiment indicator suggests positioning is still stretched, leaving some scope for de-risking in the event of adverse developments - Goldman Sachs
When investors perceive there to be little economic slack late in the cycle, they are generally skeptical of large plans to invest for growth due to uncertainty about the likely returns on those investments. Long-maturity, fixed-rate debt structures of S&P 500 companies and the ease with which they can tap into capital markets mean those firms are generally insulated from higher rates, whereas floating rate debt accounts for 30% of the debt for Russell 2000 firms -
When investors perceive there to be little economic slack late in the cycle, they are generally skeptical of large plans to invest for growth due to uncertainty about the likely returns on those investments. Long-maturity, fixed-rate debt structures of S&P 500 companies and the ease with which they can tap into capital markets mean those firms are generally insulated from higher rates, whereas floating rate debt accounts for 30% of the debt for Russell 2000 firms - Goldman Sachs

Week Ahead

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This could be a big week for the stock and bond markets. There will be lots of market-moving inflation indicators: Inflation expectations (Monday), small business pricing intentions (Tuesday), CPI (Wednesday), PPI (Thursday), and import & export prices (Friday). There will also be a couple of business cycle indicators that could move the markets: retail sales (Thursday) and industrial production (Friday). On balance, we expect that the inflation stats will confirm that it remains on a moderating trend, while the sales and output data should suggest that the strength in the Atlanta Fed's GDPNow model (with real GDP up 5.6% during Q3) is a temporary aberration from the soft-landing scenario that has prevailed since the start of last year.

The problem is that the markets may already be priced for this happy scenario. The unhappily surprising alternative would be higher-than-expected inflation and stronger-than-expected economic activity that would send both stock and bond prices lower. This week will be an important one for which scenario the markets will discount. Now consider the following:

  1. Inflation. The rise in gasoline and meat prices during August will boost the headline CPI. Wholesale used-vehicle prices increased 0.2% m/m in August. The CPI's health insurance component is very volatile (and flawed). It plunged 29.5% m/m (not annualized in July!). It might have bounced back in August.
  2. Growth. Retail sales rose 0.7% m/m during July partly because of Amazon's Prime Day. Non-store retail sales rose 1.6% m/m. Another big jump came from a 2.3% increase in food services and drinking places--boosted perhaps by fans going to, or coming from, Taylor Swift's concerts. Retail sales were probably weaker last month, though August's employment report showed that wages & salaries rose solidly during the month. That report also showed a small 0.2% increase in aggregate hours worked in manufacturing, suggesting that production rose slightly last month.
  3. Deficit. August's federal budget release (Wed) will confirm that the fiscal 2023 deficit will be around $2 trillion. There is no way to put lipstick on this pig that Washington continues to feed - 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
🔴
233.38
233.4
228.39
January 1, 2023
Forward 4-qtr PE
🔴
19.1
19.5
17.2
January 1, 2023
Nominal Earnings Yield
🔵
5.24
5.17
5.86
January 1, 2023

Options

MetricUpDnThis WeekPrior WeekNet CHG% CHG
SPX Implied Volatility
🔵
11.83
10.86
0.97
8.93%
SPX GEX Flip
🔴
4,477.5
4,482.5
-5
-0.11%
SPX Skew Adjusted GEX
🔴
-2,872,723,571
4,813,487,338
-7,686,210,909
-159.68%
Equity Put/Call Ratio (CBOE)
🔵
0.75
0.65
0.1
15.37%
VIX Put/Call Ratio (CBOE)
🔴
0.32
0.65
-0.33
-50.77%
SPX/W Put/Call Ratio (CBOE)
⚪️
1.54
1.54
0
0%
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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Sep E-mini S&P 500 futures settled at 4461.75 Friday, up by 5.50, in higher trade across the board. Combined volume came in at a one month high of 2,574,270, with Sep seeing a heavy 1,686,158 done. Across all maturities, open interest ended the session at a one month high of 2,340,638, gaining 68,212, or 3.00%. Sep open interest decreased 325,190 (15.41%), to 1,785,119.
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Option trading centered around the Sep 4475 calls with 7,788 changing hands and the Sep E2B 3825 puts with volume of 37,498. Options with the greatest open interest are the Sep EW3 2100 call with 20,799, and the Sep E2B 3825 put with 37,499.
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As measured by the 30-day at-the-money, implied volatility ended the day moderately down, off by 0.65% to finish at a one week low of 11.50%. The 30-day historical volatility ended the day lower by 0.37% to a one week low of 11.09%.
Higher TF (W → D)
Higher TF (W → D) NEUTRAL - An Inside Week following the last week’s cessation of WTF 1TFD is indicative of interim balance (within a multi-month compressing triangular Higher TF balance). September seasonality suggests continued consolidation within the above highlighted August range: 4350 → 4634.50. That said, the WHI.1 4547.75 will likely confirm as a LH (relative to 4634.50 HH) indicative of weakening buyers. If so, odds shift in favor of taking out the 4350 LL, which would create scope for continued backing & filling 4300 → 4200.
Lower TF (3H → M30)
Lower TF (3H → M30) NEUTRAL - A Lower TF bullish change of condition was signaled via the structural breakout > WHI.1 4485.50 last week. This week’s auction backtested below the BOS and plausibly completed a secondary test, thereby establishing WHI.1 4547.75 as weak (and Higher vs Lower TF structural divergence). Friday’s price action was rejected above its VA, and proceeded to print an intraday VA sweep before settling neutral. Recapturing Friday’s high creates scope to flip the GEX regime back to positive > 4531.25 (+0.44%).

Bull v Bear

This Week (30d ATM IV 11.50% v 30d RVOL 11.09%)
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Bulls will seek to extend DTF 1TFU > 4526.75. Upside: WVAH 4541.00 (+0.66%); WHI 4580.25 (+1.53%); 4600 is above +1σ (W) 4584.00 (+1.61%). YHI 4634.50 is within +2σ (W) 4660.00 (+3.30%).
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Bears will seek to break DTF 1TFU < 4491.75. Downside: WLO 4483.25 (-0.62%); WLO.1 4414.50 (-2.14%) is beyond -1σ (W) 4439.00 (-1.60%). 4400 (-2.47%) is within -2σ (W) 4368.00 (-3.18%).
Last Week (4521.50 SEP23 +1.29%)
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Bulls will seek to recapture WHI > 4547.75 on a closing basis. Upside: 4580 Supply Zone is within +1σ (W) 4592.00 (+1.56%). YTD HI 4634.50 (+2.5%) is within +2σ (W) 4662.50 (+3.12%).
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Bears will seek to further extend 1TFD and ideally < 50d MA 4492.50 on a closing basis. Downside: WLO 4414.50 is beyond -1σ (W) 4453.50 (-1.50%). LL 4350 is beyond -2σ (W) 4385.50 (-3.01%).

Indicators

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Markets
NameExcessUpDnLastPrior% CHGXS OptimismXS PessimismInverseIndex
Current Year Performance
🔴 Optimism
🔴
15.94
17.06
-6.57
10
-10
Average of All Years
⚫️ Index (N/A)
🔴
2.7
2.98
-9.4
0
0
Intermediate Term Optimism Index
⚪️ Normal
🔴
49
53
-7.55
65
35
CRB Optix
⚪️ Normal
⚪️
51
51
0
60
40
Bond Optix
🟢 Pessimism
🔴
27
31
-12.9
70
40
HYG Optix
⚪️ Normal
🔴
35.51
53.17
-33.21
80
20
US Dollar Optix
⚪️ Normal
🔵
55
50
10
60
40
BBB - AAA Corporate Bond Spread
⚫️ Index (N/A)
⚪️
0.92
0.92
0
0
0
Crude Oil Optix
🔴 Optimism
🔵
61
56
8.93
60
30
Gold Optix
⚪️ Normal
🔴
49
53
-7.55
70
30
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Positioning
NameExcessUpDnLastPrior% CHGXS OptimismXS PessimismInverseIndex
Equity Put/Call Ratio
🟢 Pessimism
🔵
0.75
0.65
15.38
0.5
0.75
VIX Put/Call Ratio
🔴 Optimism
🔴
0.32
0.66
-51.52
0.35
0.75
Stock Bond Ratio
⚪️ Normal
🔴
1.32
1.58
-16.46
2
-2
GEX / Market Cap Ratio
🟢 Pessimism
🔴
0.05
0.08
-37.5
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
🔴 Optimism
🔵
2.72
2.66
2.26
2.75
3.25
Risk Appetite Index
🔴 Optimism
🔵
0.95
0.89
6.74
0.8
0.2
MOVE Index
🟢 Pessimism
🔵
104.34
102.92
1.38
60
100
2y / 10y Yield Curve
⚫️ Index (N/A)
🔴
-73.08
-70.39
-3.82
0
0
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Volatility
NameExcessUpDnLastPrior% CHGXS OptimismXS PessimismInverseIndex
VIX Term Structure
⚪️  Normal
⚪️
0.83
0.83
0
0.8
1
Component Correlation
⚪️  Normal
⚪️
0.36
0.36
0
0.35
0.55
Gamma Exposure (x000)
⚪️  Normal
⚪️
3,769,890
3,769,890
0
4,000,000
1,000,000
Credit Default Swaps
⚫️  Index (N/A)
⚪️
422.08
422.08
0
0
0
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Breadth
NameExcessUpDnLastPrior% CHG XS OptimismXS PessimismInverseIndex
SPY Breadth (% > 50d MA)
⚪️ Normal
🔴
34.86
47.01
-25.85
70
30
SPY Breadth (% > 200d MA)
⚪️ Normal
🔴
50.5
59.32
-14.87
70
30
NYSE TRIN
⚪️ Normal
🔵
0.8
0.76
5.26
0.5
2
NYSE Advance Decline
⚫️ Index (N/A)
🔴
686,419
689,542
-0.44
0
0
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Sources

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