Market Wrap
Narratives
Week Ahead
Here are a few observations to keep in mind when the latest SEP is released on Wednesday:
- The FFR estimate for this year was raised from 5.1% to 5.6% at the June meeting, implying one more rate hike this year, "one-and-done." That isn't likely to change.
- June's SEP showed a 100bps drop in the FFR next year to 4.6%. We expect that will be raised closer to 5.6% in line with the Fed's "higher-for-longer" mantra. Convincing the markets that the Fed is in no rush to lower interest rates would be a restrictive measure that could reduce the need for any more rate hikes.
- During August, the headline and core PCED inflation rates were 3.3% and 4.2%. June's SEP anticipated these rates will fall to 3.2% and 3.9% by the end of this year. Those estimates probably won't change much in September's SEP.
- In our opinion, the financial markets have discounted a higher-for-longer FFR at the current level. That's apparent in the following chart of the FFR futures. The drop in the 12-month futures FFR during the March banking crisis has been followed by a rebound back to 5.02% on Thursday.
- The two-year Treasury yield was also back up at 5.02% on Friday. Any market reaction to the latest FOMC meeting is likely to be in response to Fed Chair Jerome Powell's speech on Wednesday. He will probably sound hawkish again, while indicating that the Fed might succeed in lowering inflation without causing a recession. That wouldn't be a new message and the bond and stock markets might remain relatively dull - Yardeni Research
Earnings
Metric | UpDn | This Week | Prior Week | Baseline | Baseline TF |
---|---|---|---|---|---|
Forward 4-qtr Estimate | 🔵 | 233.39 | 233.38 | 228.39 | January 1, 2023 |
Forward 4-qtr PE | 🔴 | 19 | 19.1 | 17.2 | January 1, 2023 |
Nominal Earnings Yield | ⚪️ | 5.24 | 5.24 | 5.86 | January 1, 2023 |
Options
Metric | UpDn | This Week | Prior Week | Net CHG | % CHG |
---|---|---|---|---|---|
SPX Implied Volatility | 🔴 | 11.35 | 11.83 | -0.48 | -4.06% |
SPX GEX Flip | ⚪️ | 4,477.5 | 4,477.5 | 0 | 0% |
SPX Skew Adjusted GEX | 🔴 | -2,984,020,932 | -2,872,723,571 | -111,297,361 | -3.87% |
Equity Put/Call Ratio (CBOE) | 🔴 | 0.7 | 0.75 | -0.05 | -6.67% |
VIX Put/Call Ratio (CBOE) | 🔵 | 0.43 | 0.32 | 0.11 | 34.38% |
SPX/W Put/Call Ratio (CBOE) | 🔴 | 1.44 | 1.54 | -0.1 | -6.49% |
Futures
Bull v Bear
This Week (30d ATM IV 11.31% v 30d RVOL 11.36%)Bulls will seek to defend the 4414.25 → 4476.25 Demand Zone, and ideally recapture WVAH 4540 on a closing basis. Upside: WHI 4566 (+1.51%); 4600 is above +1σ (W) 4572 (+1.65%).Bears will seek to quickly break WTF 1TFU and ideally recapture WLO.1 4438.25 on a closing basis. Downside: U23 Roll SETL 4461.75 (-0.81%); LL 4414.25 is beyond -1σ (W) 4426.50 (-1.59%).
Last Week (4498.00 DEC23 -0.29%)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%).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%).
Indicators
Name | Excess | UpDn | Last | Prior | % CHG | XS Optimism | XS Pessimism | Inverse | Index |
---|---|---|---|---|---|---|---|---|---|
Current Year Performance | 🔴 Optimism | 🔴 | 15.8 | 15.94 | -0.88 | 10 | -10 | ||
Average of All Years | ⚫️ Index (N/A) | 🔴 | 2.68 | 2.7 | -0.74 | 0 | 0 | ||
Intermediate Term Optimism Index | ⚪️ Normal | 🔵 | 56 | 49 | 14.29 | 65 | 35 | ||
CRB Optix | ⚪️ Normal | 🔵 | 53 | 51 | 3.92 | 60 | 40 | ||
Bond Optix | 🟢 Pessimism | 🔴 | 20 | 27 | -25.93 | 70 | 40 | ||
HYG Optix | ⚪️ Normal | 🔴 | 28.05 | 35.51 | -21.01 | 80 | 20 | ||
US Dollar Optix | ⚪️ Normal | ⚪️ | 55 | 55 | 0 | 60 | 40 | ||
BBB - AAA Corporate Bond Spread | ⚫️ Index (N/A) | ⚪️ | 0.92 | 0.92 | 0 | 0 | 0 | ||
Crude Oil Optix | 🔴 Optimism | 🔵 | 66 | 61 | 8.2 | 60 | 30 | ||
Gold Optix | ⚪️ Normal | 🔵 | 50 | 49 | 2.04 | 70 | 30 |
Name | Excess | UpDn | Last | Prior | % CHG | XS Optimism | XS Pessimism | Inverse | Index |
---|---|---|---|---|---|---|---|---|---|
Equity Put/Call Ratio | ⚪️ Normal | 🔴 | 0.7 | 0.75 | -6.67 | 0.5 | 0.75 | ||
VIX Put/Call Ratio | ⚪️ Normal | 🔵 | 0.43 | 0.32 | 34.37 | 0.35 | 0.75 | ||
Stock Bond Ratio | ⚪️ Normal | 🔵 | 1.38 | 1.32 | 4.55 | 2 | -2 | ||
GEX / Market Cap Ratio | 🟢 Pessimism | 🔴 | 0.03 | 0.05 | -40 | 0.15 | 0.05 |
Name | Excess | UpDn | Last | Prior | % CHG | XS Optimism | XS Pessimism | Inverse | Index |
---|---|---|---|---|---|---|---|---|---|
VIX Sentiment | 🔴 Optimism | 🔴 | 2.69 | 2.72 | -1.1 | 2.75 | 3.25 | ||
Risk Appetite Index | 🔴 Optimism | 🔵 | 0.98 | 0.95 | 3.16 | 0.8 | 0.2 | ||
MOVE Index | ⚪️ Normal | 🔴 | 96.61 | 104.34 | -7.41 | 60 | 100 | ||
2y / 10y Yield Curve | ⚫️ Index (N/A) | 🔵 | -70.44 | -73.08 | 3.61 | 0 | 0 |
Name | Excess | UpDn | Last | Prior | % CHG | XS Optimism | XS Pessimism | Inverse | Index |
---|---|---|---|---|---|---|---|---|---|
VIX Term Structure | ⚪️ Normal | 🔵 | 0.86 | 0.83 | 3.61 | 0.8 | 1 | ||
Component Correlation | ⚪️ Normal | ⚪️ | 0.36 | 0.36 | 0 | 0.35 | 0.55 | ||
Gamma Exposure (x000) | ⚪️ Normal | 🔴 | 1,551,360 | 3,769,890 | -66.67 | 4,000,000 | 1,000,000 | ||
Credit Default Swaps | ⚫️ Index (N/A) | 🔵 | 424.17 | 422.08 | 0.5 | 0 | 0 |
Name | Excess | UpDn | Last | Prior | % CHG | XS Optimism | XS Pessimism | Inverse | Index |
---|---|---|---|---|---|---|---|---|---|
SPY Breadth (% > 50d MA) | ⚪️ Normal | 🔴 | 34.39 | 34.86 | -1.35 | 70 | 30 | ||
SPY Breadth (% > 200d MA) | ⚪️ Normal | 🔵 | 54.71 | 50.5 | 8.34 | 70 | 30 | ||
NYSE TRIN | ⚪️ Normal | 🔵 | 0.86 | 0.8 | 7.5 | 0.5 | 2 | ||
NYSE Advance Decline | ⚫️ Index (N/A) | 🔵 | 686,532 | 686,419 | 0 | 0 | 0 |
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- Narratives - Heisenberg Report
- Week Ahead - Trading Economics
- Earnings - FactSet & Trinity Asset Management
- Options - tradingvolatility.net
- Futures - CME Group
- Indicators - Sundial Capital Research