Week of Dec 15 2024

Market Wrap

Weekly Benchmarks - @Koyfin

Weekly Factors vs. S&P 500 - @Koyfin

Weekly Performance - @Koyfin

Outlook

The market currently demonstrates strong momentum with record passive inflows of $186B over nine weeks and historically low volatility at 8% realized, supported by substantial potential capital deployment from $9T in money market funds and anticipated $1T in corporate buybacks for 2024. However, significant risks have emerged, particularly in terms of market concentration, with the Magnificent 7 now representing an unprecedented 33% of S&P 500 market cap, while market breadth continues to deteriorate with only 31% of stocks outperforming the S&P 500 in 2024. The equal-weighted index's break below its seasonal range, despite new index highs, further emphasizes these concerns.

On the monetary policy front, while markets have priced in an 87% probability of a December Fed rate cut, strong economic indicators (including 3.3% Q4 GDP) may constrain the Fed's ability to ease as aggressively as markets expect. This dynamic is particularly interesting given that Treasury volatility has reached three-year lows despite persistent inflation concerns.

Looking ahead, several crucial catalysts warrant attention, including upcoming central bank decisions from the Fed, ECB, BOJ, and PBoC, along with their 2024 projections. The Q4 earnings season will be particularly significant, with Micron's report potentially providing key insights into the semiconductor sector. Market participants should also closely monitor Flash PMIs and PCE data for insights into the growth-inflation balance. Key technical levels to watch include SPX 6100 (Goldman's year-end target) and VIX 12 handle (lowest since July), while the high-yield bond market's divergence from equities raises additional concerns about market stability.

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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	🔵	263.39	263.36	243.98	January 1, 2024
Forward 4-qtr PE	⚪️	23.1	23.1	20.16	January 1, 2024
Nominal Earnings Yield	⚪️	4.33	4.33	5.19	January 1, 2024

Volatility & Correlations

Metric	UpDn	This Week	Prior Week	Net CHG	% CHG
SPX Implied Volatility	🔵	9.86	9.14	0.72	7.88%
SPX GEX Flip	🔵	6,037.5	6,022.5	15	0.25%
SPX Skew Adjusted GEX	🔵	892,346,632	-3,090,108,812	398,455,444	128.88%
Equity Put/Call Ratio	🔵	0.58	0.54	0.04	7.41%
SPX/SPXW Put/Call Ratio	🔴	1.38	1.58	-0.2	-12.66%
VIX Put/Call Ratio	🔴	0.29	0.53	-0.24	-45.28%

Cross-Asset Volatility — CBOE

Cross-Asset Correlation — CBOE

S&P 500 Futures

Dec E-mini S&P 500 futures closed at 6055.50 Friday, down 5.25, in lower trade across the board. Across all maturities, 1,826,146 contracts changed hands, with 1,868,428 traded in the Dec maturity.

Option volumes were greatest for the Dec 6200 call (8,106) and the Dec E3A 5250 put (50,022).

E-mini S&P 500 implied volatility finished the session moderately lower as the 30-day at-the-money lost 0.23% to close the day at 9.74%, a one week low. Higher by 0.0165%, historical volatility (as measured by the 30-day) ended the day at 11.63%.

Higher TF (W → D) BULLISH - The Q424 market structure maintains a "spike & channel trend" within a multi-quarter bull channel (highlighted on chart 2). The key question now: Is the channel phase of this trend evolving into a trading range or forming another bull flag? Downside breakouts from bull channels, as signaled this week, typically evolve into trading ranges where the channel base often gets retested. The bullish control point remains HL 5855 (-3.31% v -4% p), formed during the November 19th reversal from the October VPOC and 50d MA retest. However, on a higher timeframe, these pullbacks represent flag patterns.

Lower TF (3H → M30) BEARISH - Lower timeframe analysis shows this week's price action contained in a modest bear channel (highlighted on chart 1). Wednesday's reversal formed a closing bear channel with 2 pushes down (versus the typical 3), suggesting unfinished downside potential. The key lower timeframe question: Will bears successfully offer below WLO, or get trapped and form a new higher low relative to 6039.75? Currently, the lower timeframe downtrend is facilitating a higher timeframe pullback, with Friday's double-top high at 6085.25 (+0.5%), coinciding with the WVAH, serving as the control point.

Bull v Bear

ATM IV30 9.74% v HV 11.63% IV-HV -1.89%
Bulls will seek to recapture DTF 1TFU and establish acceptance > 6085.75 WVAL. Upside: MM target 6129.25 (+1.22%) is within +1σ (W) 6155 (+1.64%).
Bears will seek to extend DTF 1TFD and offer below WLO 6039.75 on a closing basis. Downside: Control Point 6000.25 (-0.91%) is within -1σ (W) 5959.00 (-1.59%).

Last Week: 6055.00 DEC24 -0.78%
~~Bulls will seek extend DTF 1TFU and maintain price acceptance > 6064.50 WVAL. Upside: MM target 6129.25 is~~ ~~within~~ ~~+1σ (W) 6191 (+1.51%).~~
Bears will seek to reclaim DTF 1TFD and offer below 6064.50 on a closing basis. Downside: Control Point 6000.25 is just beyond -1σ (W) 6009.00 (-1.48%).

Indicators

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Positioning

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Volatility

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