Market Wrap
Narratives
Vol is mean-reverting. And that dynamic isn’t lost on traders, and the temptation to exploit the mean reversion tendency is more powerful in environments where it’s consistently rewarded. Successful exploitation breeds more success to the extent it pressures vol lower and/or creates the conditions whereby equities stay pinned in a relatively narrow range — Charlie McElligott, Nomura
Week Ahead
It's a short week ahead and a light one for economic releases. We expect that the financial markets will start to focus on the following week when both the CPI and the federal deficit will be released for August on Wednesday, September 13. One week after that happens, the FOMC will decide whether to hike the federal funds rate or not. We think the Fed is done. We remain optimistic about the outlook for inflation, but we can't find any way to put lipstick on the debt pig that Washington is feeding.
- August's NM-PMI (Wednesday) could confirm that the services economy is slowing as shown by the comparable series compiled by S&P Global
- We will be interested to see the prices-paid index in the NM-PMI survey. It has been a remarkably good 3-month leading indicator of the headline CPI inflation rate on a y/y basis. It suggests that this inflation rate could be close to 2.0% in October's CPI report, which will be released during the second week of November, just in time for another Santa Claus rally!
- August's consumer-related reports include auto sales (Tuesday), mortgage applications (Wednesday), and consumer credit (Friday). Railcar loadings of motor vehicles suggest that auto sales remained strong around 15.0 million units (saar) last month.
- On the other hand, auto loans at the banks fell 2.1% y/y through the August 23 week, while revolving credit at the banks rose 11.2% - Yardeni Research
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Earnings
Metric | UpDn | This Week | Prior Week | Baseline | Baseline TF |
---|---|---|---|---|---|
Forward 4-qtr Estimate | 🔵 | 233.4 | 232.8 | 228.39 | January 1, 2023 |
Forward 4-qtr PE | 🔵 | 19.5 | 18.9 | 17.2 | January 1, 2023 |
Nominal Earnings Yield | 🔴 | 5.17 | 5.28 | 5.86 | January 1, 2023 |
Options
Metric | UpDn | This Week | Prior Week | Net CHG | % CHG |
---|---|---|---|---|---|
SPX Implied Volatility | 🔴 | 10.86 | 13.44 | -2.58 | -19.2% |
SPX GEX Flip | 🔵 | 4,482.5 | 4,442.5 | 40 | 0.89% |
SPX Skew Adjusted GEX | 🔵 | 4,813,487,338 | -7,519,334,506 | 12,332,821,844 | 164.01% |
Equity Put/Call Ratio (CBOE) | 🔴 | 0.65 | 0.97 | -0.32 | -32.99% |
VIX Put/Call Ratio (CBOE) | 🔵 | 0.65 | 0.25 | 0.4 | 160% |
SPX/W Put/Call Ratio (CBOE) | 🔵 | 1.54 | 1.39 | 0.15 | 10.79% |
Futures
Friday's E-mini S&P 500 market was higher with the Sep contract gaining 5.50 to 4521.50. Overall volume was 1,436,560, with Sep seeing 1,416,762 done. Total open interest decreased by 3,520, or 0.16%, to 2,262,421. Sep fell by 8,460 (0.38%), finishing at 2,205,608.
Option trading centered around the Sep 4550 calls with 9,723 done and the Sep E1C 3725 puts with volume of 52,193. Calls with the most open interest are the Dec 5000 strike (17,987), and for the puts are the Sep E1C 3725 strike (54,553).
E-mini S&P 500 implied volatility settled down as the 30-day at-the-money dropped 0.53% to close the session at 10.64%, a one month low. Historical volatility (30-day) closed the day at 11.38%, dropping by 0.0620%. The volatility spread (30-day, IV-HV) finished the session at a one month low of -0.74%, having decreased 0.4680%.
Bull v Bear
This Week (30d ATM IV 10.64% v 30d RVOL 11.38%)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%).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%).
Last Week (4521.50 SEP23 +1.29%)Bulls will seek to recapture DTF 1TFU > 4429 on a closing basis and ideally 4470. Upside: WHI 4485.50 → 50d MA 4487.50 are within +1σ (W) 4497 (+1.87%). WHI.1 4517.75 (+2.34%).Bears will seek to further extend 1TFD < WLO 4365.25 (-1.11%) on a closing basis. Downside: MLO 4350 iswithin-1σ (W) 4335 (-1.80%). Departure Gap and 4300 retest (-2.59%).
Indicators
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