Week of Nov 24 2024

Market Wrap

Weekly Benchmarks - @Koyfin

Weekly Factors vs. S&P 500 - @Koyfin

Weekly Performance - @Koyfin

Outlook

The S&P 500 approaches 6000 following a 1.65% weekly gain, demonstrating remarkable resilience supported by record equity inflows ($105 billion over three weeks) and substantial corporate buyback activity. Goldman Sachs projects a year-end target of 6200, emphasizing the need for broader market participation beyond the Magnificent 7 stocks, whose positioning has reached one-year lows despite their 31.71% index weight.

The technical framework shows key support at the 50-day moving average (5800 area) with resistance building toward 6000-6200. However, concerning breadth divergences have emerged, with the Risk-Off Composite Model triggering new warnings. Notable is the rapid decline in new highs, with more NYSE issues at 52-week lows than highs shortly after post-election optimism.

A stark regional divergence persists in capital flows, with US equities attracting substantial inflows while European markets face eight consecutive weeks of outflows and Emerging Markets experience six weeks of outflows. The market displays a consistent intraday pattern: morning weakness (European selling) followed by afternoon strength (US institutional demand).

Energy stocks show concerning divergence from underlying commodity prices, trading near 1-year highs while crude oil remains at 1-year lows - historically a bearish signal with 70-80% reliability. Value and Real Estate sectors demonstrate the strongest seasonal performance during year-end rallies, suggesting potential rotation opportunities. NVIDIA's muted earnings reaction, despite doubled revenue, indicates possible exhaustion in mega-cap tech positioning.

Left tail risks have evolved beyond monetary policy concerns to include geopolitical tensions, particularly following developments in Ukraine-Russia relations. The right tail scenario centers on an AI-driven "Roaring 20s" thesis, potentially supporting S&P 500 reaching 7000 next year. Market vulnerability is heightened by deteriorating breadth metrics, though partially offset by strong seasonal patterns.

Trading dynamics will be influenced by holiday liquidity conditions and corporate activity until the December 23rd buyback blackout window. The period from November 25 through December 4 has historically been especially positive. January could bring additional support through retirement account reallocation flows. While the VIX settling at 15 suggests constructive positioning, maintaining tactical flexibility around geopolitical developments remains prudent.

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Macro Dashboard

Forward Earnings

Metric	UpDn	This Week	Prior Week	Baseline	Baseline TF
Forward 4-qtr Estimate	🔵	263.38	263.01	243.98	January 1, 2024
Forward 4-qtr PE	⚪️	22.6	22.6	20.16	January 1, 2024
Nominal Earnings Yield	🔴	4.43	4.48	5.19	January 1, 2024

Volatility & Correlations

Metric	UpDn	This Week	Prior Week	Net CHG	% CHG
SPX Implied Volatility	🔴	11.35	12.48	-1.13	-9.05%
SPX GEX Flip	⚪️	5,927.5	5,927.5	0	0%
SPX Skew Adjusted GEX	🔵	4,165,030,933	-3,467,360,973	7,632,391,906	220.12%
SPX/SPXW Put/Call Ratio	🔵	1.37	1.34	0.03	2.24%
OEX Put/Call Ratio	🔴	0	1	-1	-100%
VIX Put/Call Ratio	🔴	0.85	0.88	-0.03	-3.41%

Cross-Asset Volatility — CBOE

Cross-Asset Correlation — CBOE

S&P 500 Futures

E-mini S&P 500 futures were higher Friday with the Dec contract finishing the session at a one week high of 5987.00, up by 16.50. Across all maturities, the session saw 1,561,094 contracts done, with Dec volume coming in at 1,550,734. Overall open interest closed at a one month high of 2,268,229, up 15,547 (0.69%). Dec open interest added 9,629, or 0.45%, to 2,166,868.

Option volumes were greatest for the Nov EW 6120 call (6,957) and the Nov E4A 5000 put (32,311). Highest volumes in Dec option trading were seen in the 6200 calls (3,448) and the 4800 puts (2,838). Calls with the most open interest are the Dec 6000 strike (43,358), and for the puts are the Nov E4A 4800 strike (44,419).

E-mini S&P 500 implied volatility was sharply lower as the 30-day at-the-money fell by 1.17% to end the day at 11.72%, a one week low. Down 0.17%, historical volatility (as measured by the 30-day) finished the session at 13.27%.

Higher TF (W → D) BULLISH - Sellers were well-positioned to further press the downside, but their lack of follow-through created a notable bear trap that preempted a retest of the 50-day MA. Until proven otherwise, price action confirmed the conclusion of an unsurprising (50%) backing and filling phase of the post-election breakout. The strong position of weekly close, within a clear 3-month bull-channel, double-bottom (circled) coinciding with a secondary test of the Q324 breakout (5782.50), favorable seasonality → EOY, and unfinished business above (ETH ATH 6053.25 +1.11%) increases the odds of trend continuation and eventual new highs.

Lower TF (4H → M30) BULLISH - Last week’s reversal was signaled by a prominent breakdown failure (above circled) below the then prevailing bear-channel, which initially retraced to the trend-line, where bears once again responded causing a rotation back to the channel-line on Wednesday. Here, previously trapped out bulls entered and trapped in bears exited, which confirmed a trend reversal and realignment with the higher-timeframe structure. Bulls remain in control of the newly formed bull channel (blue highlighted), and closed above the midpoint. Acceptance above 6000 will confirm the breakout above TR 5854.75 → 5957.50 (see Chart 2, M30).

Bull v Bear

This Week: ATM IV30 11.72% v HV 13.27% IV-HV -1.55%
Bulls will seek extend DTF 1TFU and re-establish price acceptance > 6000. Upside: ETH (weak) ATH 6053.25 is within +1σ (W) 6095 (+1.80%).
Bears will seek to reclaim DTF 1TFD and offer below 5957.50 on a closing basis. Downside: 5919.50 WVPOC → 5887.00 WVAL are within -1σ (W) 5882 (-1.75%).

Last Week: 5987.00 DEC24 +1.60%
Bulls will seek cessation of DTF 1TFD and ideally mitigate Friday’s true gap on a closing basis. Upside: Reclamation of 6000 (+1.76%) is within +1σ (W) 6010 (+1.92%).
~~Bears will seek to extend DTF 1TFD and offer inside the lowest of November’s triple HVN distributions. Downside: 50-day MA 5818.75 and < 5800 are~~ ~~within~~ ~~-1σ (W) 5787 (-1.86%).~~

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