Week of Nov 10 2024

Market Wrap

Weekly Benchmarks - @Koyfin

Weekly Factors vs. S&P 500 - @Koyfin

Weekly Performance - @Koyfin

Outlook

The market narrative entering year-end 2024 continues to crystallize around a powerful technical setup driven by both positioning dynamics and fundamental underpinnings. The most immediate catalyst has been the historic volatility collapse, with the VIX experiencing its largest single-day decline (-20.4%) amid a record $16.6 billion leveraged ETF rebalancing flow. This technical pressure has manifested through multiple channels - unwinding of over-hedged downside puts, positive delta impulse from option structures, and systematic buying programs triggered by lower volatility. Supporting the technical picture, Q3 earnings have significantly outperformed with 76.2% of companies beating estimates by an average of 7.8%, while forward estimates continue to strengthen across most sectors. The fundamental backdrop appears increasingly supportive, with high-frequency indicators showing resilient consumer spending, stable labor markets, and corporate profitability near all-time highs as a share of GDP. The LSEG data shows S&P 500 Q3 earnings growth at 8.6% YoY versus 5.3% expected at the start of October, with forward 4-quarter estimates rising to $263.39. Key sectors like Communication Services (+25.5%), Technology (+17%), and Healthcare (+14.6%) are demonstrating particularly strong momentum. Default rates are declining in leveraged credit markets despite higher rates, while container volumes through LA ports suggest robust holiday sales ahead. However, a key tension exists between near-term momentum and medium-term structural risks. While technical flows and positioning could drive the SPX toward 6000-6050 over the next 3-4 months, valuation metrics flash warning signs with a forward P/E of 22.7x and earnings yield of 4.41%. The primary left tail risk centers on sticky inflation forcing the Fed to maintain restrictive policy longer than expected, particularly given Apollo's analysis suggesting rate normalization to 3% would add 1% to inflation. The right tail scenario envisions a "melt-up" where $6.6 trillion in money market assets combines with positive gamma hedging flows to drive an accelerated rally. Near-term catalysts include the core CPI print (Nov 13), retail sales (Nov 15), and heavy Treasury supply through year-end. The market is closely watching whether dealer gamma positioning shifts from long to short, which could accelerate moves in either direction. Technical levels in focus include the 5800-6000 SPX zone where significant gamma resides and the 4.75-5.00% range for 10-year yields. Historical post-election patterns favor small-cap and value outperformance through Q2 2025, creating an interesting tension with recent large-cap/growth leadership. The resolution of this dynamic, along with the path of volatility compression, will likely determine whether year-end price action follows a "grind higher" or more explosive trajectory. The alignment of strong earnings, resilient economic data, and powerful technical flows suggests the path of least resistance remains higher into year-end, though increasing attention must be paid to stretched valuations and the potential for inflation persistence to complicate the Fed's path to normalization in 2025. The market structure experts note that maintaining the positive gamma regime and steady decline in volatility are critical to sustaining the constructive setup.

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Forward Earnings

Metric	UpDn	This Week	Prior Week	Baseline	Baseline TF
Forward 4-qtr Estimate	🔴	263.39	264.67	243.98	January 1, 2024
Forward 4-qtr PE	🔵	22.7	21.6	20.16	January 1, 2024
Nominal Earnings Yield	🔴	4.41	4.63	5.19	January 1, 2024

Volatility & Correlations

Metric	UpDn	This Week	Prior Week	Net CHG	% CHG
SPX Implied Volatility	🔴	11.44	17.29	-5.85	-33.83%
SPX GEX Flip	🔵	5,867.5	5,729	138.5	2.42%
SPX Skew Adjusted GEX	🔵	4,039,042,620	-11,997,141,662	16,036,184,282	133.67%
SPX/SPXW Put/Call Ratio	🔴	1.38	1.59	-0.21	-13.21%
OEX Put/Call Ratio	🔵	4.33	0.12	4.21	3,508.33%
VIX Put/Call Ratio	🔴	0.66	2.32	-1.66	-71.55%

Cross-Asset Volatility — CBOE

Cross-Asset Correlation — CBOE

S&P 500 Futures

Dec E-mini S&P 500 futures finished the session at a contract high of 6025.25 Friday, up 21.50. Overall volume was 1,292,893, with the Dec maturity seeing 1,052,982 change hands.

Option trading centered around the Dec 6400 calls with 8,195 changing hands and the Nov E2B 5050 puts with volume of 83,392.

Implied Volatility closed the day lower with the 30-day at-the-money dropping by 0.36%, to finish the session at a one month low of 11.30%. Historical volatility (30-day) finished at 13.04%, down by 0.0151%. The 30-day volatility spread (IV-HV) lost 0.3495% to close at a one month low of -1.74%. As measured by the 30-day, the 25-delta Risk Reversal ended the day slightly higher, up by 0.0119% to close the session at a one month high of -2.63%.

Higher TF (W → D) BULLISH -HTF buyers showed massive responsiveness on the third push down against the October Low of 5724 (a weak triple bottom), demonstrating the power of breakout failures—especially when catalyzed by a historic volatility collapse (-20.4%). The ensuing unwind created a key-reversal print on the monthly timeframe, leading to new all-time highs and reclaiming positive dealer GEX. The swift and extensive reversal left numerous gaps, so MTF value hasn't yet confirmed the move. Nonetheless, bullish structure has been reestablished, and buyers will aim to maintain the bid above the October High 5927.25 breakout (-1.63%).

Lower TF (4H → M30) BULLISH - The consequence of crowded positioning and lack of follow-through below 5724 was immediately seized upon by strong responsive buying, forcing covering and FOMO flows after key event risks were mitigated. This textbook "always-in long" trend only began to relent on Friday, but notice the intraday channel broke into the close. The week ahead will determine whether the closing price action transitions into an interim trading range or bull flag—odds favor the latter based on momentum factors. While some cooling off wouldn't be surprising, acceptance above 6000 coincides with maintaining the DTF (1TFU) bullish structure.

Bull v Bear

This Week: 30d ATM IV 11.30% v HV 13.04% IV-HV -1.74%
Bulls will seek to extend WTF 1TFU on a closing basis. Upside: 6130.50 100% MM (> TR 5724.00 → 5927.25) is coincidental with +1σ (W) 5932.50 (+1.78%).
Bears will seek cessation of DTF 1TFU and ideally offer below 6000 on a closing basis. Downside: October BOS 5927.25 is within -1σ (W) 5922.00 (-1.71%).

Last Week: 6025.25 DEC24 +4.61%
Bulls will seek to DTF 1TFU and ideally re-establish price acceptance above 5825.75 on a closing basis. Upside: WVPOC 5868 and WVAH 5892 are within +1σ (W) 5910 (+2.64%).
~~Bears will seek cessation of MTF 1TFU by breaking below 5724 on a closing basis. Downside: YVAH 5678.25 and DTF FVG 5628.75 are~~ ~~within~~ ~~-1σ (W) 5614.50 (-2.50%).~~

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