Week of Oct 06 2024

Market Wrap

Weekly Benchmarks - @Koyfin

Weekly Factors vs. S&P 500 - @Koyfin

Weekly Performance - @Koyfin

Outlook

The economic landscape is characterized by stronger-than-expected job growth and steady corporate earnings, leading to a shift in monetary policy expectations. The Fed's September rate cut, while defensible at the time, now appears less necessary in hindsight. As a result, the focus has shifted to the sustainability of this growth, potential inflationary pressures, and how the Fed will balance these factors in its upcoming policy decisions. The market remains in a positive trend, but with heightened sensitivity to upcoming economic data, central bank actions, and geopolitical developments.

Corporate earnings for the S&P 500 continue to show growth, with LSEG projecting 5.0% year-over-year earnings growth for Q3 2024 and more robust growth in 2025. This supports the broader narrative of sustained economic expansion, though at a more moderate pace than previously anticipated.

The main macro tail risks span both sides of the inflation and growth spectrum. On the right tail, there's a risk of resurgent inflation if the economy continues to outperform expectations, potentially forcing the Fed to maintain higher rates for longer or even resume tightening. The left tail risk involves a potential hard landing if inflation proves sticky and requires more aggressive policy tightening, or if external shocks significantly impact growth.

Key upcoming catalysts include the October CPI release, retail sales data, and the Q3 GDP report. These will be crucial in determining whether the Fed pauses rate cuts in November or proceeds with another 25 basis point reduction. The U.S. presidential election in November remains a significant event on the horizon, with potential implications for fiscal and trade policies.

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Calendar (UTC-4)

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Macro Dashboard

Forward Earnings

Metric	UpDn	This Week	Prior Week	Baseline	Baseline TF
Forward 4-qtr Estimate	🔵	266.66	257.47	243.98	January 1, 2024
Forward 4-qtr PE	🔴	21.4	22.3	20.16	January 1, 2024
Nominal Earnings Yield	🔵	4.67	4.48	5.19	January 1, 2024

Volatility & Correlations

Metric	UpDn	This Week	Prior Week	Net CHG	% CHG
SPX Implied Volatility	🔵	13.85	12.55	1.3	10.36%
SPX GEX Flip	🔵	5,702.5	5,672.5	30	0.53%
SPX Skew Adjusted GEX	🔴	10,792,306,599	10,802,624,639	-10,318,040	-0.1%
SPX/SPXW Put/Call Ratio	🔵	1.5	1.43	0.07	4.9%
OEX Put/Call Ratio	🔴	0.45	9	-8.55	-95%
VIX Put/Call Ratio	🔵	0.34	0.24	0.1	41.67%

Cross-Asset Volatility — CBOE

Cross-Asset Correlation — CBOE

Futures

E-mini S&P 500 futures were lower Friday with the Dec contract finishing the session at 5800.00, adding 50.50. Overall the session saw 1,424,191 contracts change hands, with Dec volume coming in at 1,358,771.

The Oct E2B 4750 put saw the most changing hands with 85,554 contracts done. Largest volumes in Oct option trading were seen in the 5900 calls (2,898) and the 5200 puts (6,828).

Implied Volatility ended the day sharply down with the 30-day at-the-money lower by 1.80%, to close at 13.08%. Historical volatility (30-day) closed the session at 12.54%, dropping 0.14%.

Higher TF (W → D) BULLISH - While the pullback exceeded last week’s low ending WTF 1TFU, buyers defended multiple retests of the August range (MHI 5730.25), indicative of absorption. Trapped sellers were summarily squeezed on Friday, and the resulting trend bar signals either a conclusion of the preceding channel and transition into a trading range, or a bull flag targeting the weak ETH ATH 5830 (+0.52%) predicated on follow-through in the coming week. Conversely a loss of WLO 5724 (-1.31%) creates scope for retesting the yearly VAH 5643 (-2.71%).

Lower TF (4H → M30) NEUTRAL - Lower-timeframe trends facilitate higher timeframe pullbacks. The price action perfectly demonstrated the transition from trend channel, to trading range, to breakout. Bulls will ideally establish value outside and above Friday’s VA (> 5786) and target a new ATH, whereas bears will seek to cause a multi-day breakout failure by offering below 5772.75 on a closing basis — and offer below WLO 5724 thereafter. That said, price action is likely to remain subdued until the release of upcoming catalysts: Fed minutes (Wed), CPI (Thu), and PPI (Fri).

Bull v Bear

This Week: 30d ATM IV 13.08% v 30d HV 12.54% +0.54%
Bulls will seek to recapture WTF 1TFU and establish a new ATH on a closing basis. Upside: 5900(~5850 SPX) is within +1σ (W) 5933 (+2.29%).
Bears will seek to maintain and extend WTF 1TFD and offer below the WLO 5724 (-1.31%) on a closing basis. Downside: 5700 (-1.72%) is within -1σ (W) 5672.50 (-2.20%).

Last Week: 5800.00 DEC24 +0.07%
Bulls will seek to breakout above Friday’s high and maintain price acceptance above 5800. Upside: WHI 5830 → 5850 strike (~5800 SPX) is within +1σ (W) 5908.50 (+2.02%).
Bears will seek to recapture DTF 1TFD and offer below the WLO 5745.25 (-0.79%) on a closing basis. Downside: GEX Flip ~5700 (-1.58%) is within -1σ (W) 5678.00 (-1.95%).

Indicators

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