Market Wrap
Narratives
That longtime crutch of equities markets — the fundamentals of EPS / revenue beats versus low-bar expectations — has been flipped on its head. Recently, we’ve seen an earnings revision upgrade dynamic acting as a headwind, particularly in the crowded market leadership of growth tech, comms services, story stocks and AI themes. Crowded growth shares and tech longs are actually putting up good enough numbers but still not being rewarded by the market, especially when EPS beats but revenue misses. You can feel it in the PNL and you can see it in the intraday behaviors and end-of-day performance of late. A bunch of the stuff that’s been high Sharpe over parts of the year has recently turned high vol; that’s bad news. The implications for systematic flows are potentially bearish. If single-name vols jump, that could elicit an expansion for index realized vol, which could in turn dictate mechanical de-leveraging from vol control cohorts — Charlie McElligott, Nomura
Week Ahead
Earnings report will continue at full force next week, with investors anticipating updates from major companies, including Apple Inc, Airbnb, Advanced Micro Devices, Amgen, Caterpillar Inc, Etsy, Eli Lilly and Co, Liberty Global, McDonald's Corp, Moderna, Novo Nordisk, PayPal, Pinterest, Pfizer, Starbucks.
Additionally, all eyes will be on the US FOMC meeting, where policymakers are expected to maintain interest rates, the focal points will include expectations for the December meeting, and any clues regarding the conditions required for the FOMC to initiate rate cuts in the coming year.
Turning to economic data, the US jobs report will likely reveal a 172K increase in non-farm payrolls for October, far below a 336K jobs in September. The unemployment rate is forecast to hold steady at 3.8%, with monthly wage growth expected to rise to 0.3% from 0.2%. Other releases to watch for include October's ISM PMI surveys, JOLTs job openings, Q3 employment cost index and productivity, Case-Shiller home prices, ADP Employment Change, factory orders, and regional activity indexes such as the Dallas Fed Manufacturing Index and Chicago PMI - Trading Economics
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Earnings
Metric | UpDn | This Week | Prior Week | Baseline | Baseline TF |
---|---|---|---|---|---|
Forward 4-qtr Estimate | 🔴 | 238.46 | 238.95 | 228.39 | January 1, 2023 |
Forward 4-qtr PE | 🔴 | 17.3 | 17.6 | 17.2 | January 1, 2023 |
Nominal Earnings Yield | 🔵 | 5.79 | 5.66 | 5.86 | January 1, 2023 |
Options
Metric | UpDn | This Week | Prior Week | Net CHG | % CHG |
---|---|---|---|---|---|
SPX Implied Volatility | 🔵 | 18.3 | 17.49 | 0.81 | 4.83% |
SPX GEX Flip | 🔴 | 4,287.5 | 4,332.5 | -45 | -1.04% |
SPX Skew Adjusted GEX | 🔵 | -14,135,252,069 | -16,084,681,354 | 1,949,429,285 | 12.12% |
Equity Put/Call Ratio (CBOE) | 🔵 | 0.82 | 0.76 | 0.06 | 7.89% |
VIX Put/Call Ratio (CBOE) | 🔴 | 0.53 | 0.87 | -0.34 | -39.08% |
SPX/W Put/Call Ratio (CBOE) | 🔵 | 1.55 | 1.27 | 0.28 | 22.05% |
Futures
Dec E-mini S&P 500 futures ended the session at a one month low of 4137.75 Friday, dropping by 18.75. Across all maturities, the session saw a heavy 2,203,168 contracts done, with Dec volume coming in at 2,195,767. Overall open interest lost 1,201, or 0.0549%, to 2,188,163. Dec shed 2,066 (0.0957%), finishing at 2,157,439.
The Oct E5A 3475 put saw the most changing hands with 91,684 contracts done. For Dec options, the 4500 calls were the most active with 3,387 changing hands, and the high volume put was the 4000 strike with 6,075 contracts traded. Option open interest is highest for the Dec 4500 calls at 25,021, and the Oct E5A 3475 puts at 92,901.
Implied Volatility finished the day slightly higher with the 30-day at-the-money up 0.13%, to settle at a one month high of 18.28%. The 30-day historical volatility finished the day down by 0.0339% to 13.23%.
Bull v Bear
This Week (30d ATM IV 18.06% v 30d RVOL 12.92%)Bulls will seek to recapture WVAL 4178.25 (+0.98%) on a closing basis. Upside: LL 4213.25 (+1.82%) is within +1σ (W) 4243 (+2.54%). 200d MA 4274 (+3.29%); WHI 4290.50 (+3.69%).Bears will seek to extend downside continuation and cause BOS < HL 4114 (-0.57%) on a closing basis. Downside: May LO 4062.25 (-1.82%) is within -1σ (W) 4037 (-2.43%); 4000 (-3.33%).
Last Week (4248.50 DEC23 -2.01%)Bulls will seek to recapture 4300 (+1.21%) on a closing basis. Upside: WVAL 4331 (+2.0%) is within +1σ (W) 4359 (+2.6%). 50d MA 4414 (+3.91%); WHI 4423.25 (4.11%).Bears will seek to establish price acceptance below 4200 (-1.44%). Downside: Q422 Anchored VWAP (and multi-year HVN) 4155.25 (-2.19%) is within -1σ (W) 4143 (-2.48%)
Indicators
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