Week of Jan 21 2024

Market Wrap

Weekly Benchmarks - @Koyfin

Weekly Factors vs. S&P 500 - @Koyfin

Weekly Performance - @Koyfin

Narratives

The apparent market indifference toward the University of Michigan inflation expectations data was notable insofar as this particular inflation series is not only a Fed-favorite, but it’s also been associated with sharp price action in US rates throughout much of the cycle. By offering a collective shoulder shrug at the downside surprise, the message is clear: Investors have moved on from trading incremental inputs for the broader inflation expectations profile. This reflects a growing sense of confidence that the Fed has, in fact, managed to moderate the trajectory of consumer prices without tipping the US into a deflationary environment. It remains to be seen how much evidence the Fed itself needs to be convinced — Ian Lyngen and Ben Jeffery, BMO

Long Magnificent 7 is the most crowded trade according to our Global Fund Manager Survey. Performance, and the extent to which it’s driving index performance, suggests equities are still running on AI optimism ahead of earnings from the tech heavyweights - Bank of America

The ratio of MOVE to VIX tends to correlate well with the ratio of the interest cost burden of the government sector to that of the corporate sector. The collapse in the net interest cost of corporates is therefore consistent with very low levels of equity volatility compared to rates volatility - SocGen

Yields have moved up off the local lows, and attendant dollar strength in the new year is negative in a lightly positioned market, but traders are still pricing in 140bps of Fed cuts in 2024, and the zeitgeist is firmly ‘buy-the-dip’ as Powell’s pivot means H1 upside is bigger than downside - Bank of America

Week Ahead

In the United States, the focus will be on the advance estimate of Q4 GDP growth, along with personal outlays and income from December, and durable goods orders. The US economy is predicted to have grown at an annualized rate of 1.8% in Q4, a considerable slowdown from the 4.9% growth seen in the previous quarter. Core PCE prices are also expected to have increased by 0.2% in December, slightly up from the 0.1% increase in November. The report will likely show a 0.2% increase in personal spending and a 0.3% rise in income. Durable goods orders are also expected to have increased by 0.5%, following a 5.4% jump in November, the largest since July 2020. Investors will be keenly watching the flash S&P Global PMI survey, new and pending home sales, the Chicago Fed National Activity Index, and the advance estimates of wholesale sales and the goods trade balance. The fourth-quarter earnings season will also be in full swing, featuring reports from major companies like American Express, Johnson & Johnson, Procter & Gamble, Intel Corp, IBM, Netflix, Tesla, AT&T, Blackstone, 3M, General Electric, Verizon, Intuitive Surgical, Visa, and ServiceNow. (Source: Trading Economics)

‣

Calendar (UTC-4)

‣

Macro Dashboard

Earnings

Metric	UpDn	This Week	Prior Week	Baseline	Baseline TF
Forward 4-qtr Estimate	🔴	242.92	243.52	243.98	January 1, 2024
Forward 4-qtr PE	🔵	19.9	19.6	20.16	January 1, 2024
Nominal Earnings Yield	🔴	5.02	5.09	5.19	January 1, 2024

Options

Metric	UpDn	This Week	Prior Week	Net CHG	% CHG
SPX Implied Volatility	🔵	10.87	10.48	0.39	3.72%
SPX GEX Flip	🔵	4,772.5	4,747.5	25	0.53%
SPX Skew Adjusted GEX	🔴	-1,728,307,087	-1,695,277,435	-33,029,652	-1.95%
Equity Put/Call Ratio (CBOE)	🔴	0.59	0.83	-0.24	-28.92%
VIX Put/Call Ratio (CBOE)	🔵	0.37	0.19	0.18	94.74%
SPX/W Put/Call Ratio (CBOE)	🔴	1.27	1.34	-0.07	-5.22%

Skew-Adjusted Gamma by Strike - @tradevolatility

Skew-Adjusted GEX Trend - @tradevolatility

Implied Volatility Trend - @tradevolatility

Put/Call OI Trend - @tradevolatility

Futures

Friday's E-mini S&P 500 market was mostly lower with the March contract gaining 1.00 to 4816.50. Overall volume was 1,522,005, with March seeing 1,519,899 traded. Across all maturities, open interest fell by 586 (0.0267%) to 2,197,861. March lost 1,356, or 0.0623%, finishing at 2,176,293.

Option trading centered around the Jan EW3 4850 calls with 6,935 changing hands and the Jan E3C 4000 puts with volume of 56,288. Option open interest is largest for the March 5000 calls at 17,029, and the Jan E3C 4000 puts at 60,234.

Implied Volatility ended slightly higher with the 30-day at-the-money up by 0.0158%, to settle at 10.34%. Off 0.0191%, historical volatility (as measured by the 30-day) closed the session at 9.85%.

Higher TF (W → D) BULLISH - Fresh ATHs (after 24-weeks) on a closing basis following a textbook breakout from a 4-week balance with confirming daily volume sufficiently signals the resumption higher timeframe trend. All timeframes (quarterly, monthly, weekly, daily) are once again 1TFU synchronized, and January value has been established overlapping and above December; ascending value areas must continue to develop and hold, but so far so good - with Q124 establishing outside and above the Supply Line.

Lower TF (3H → M30) BULLISH - Pane 1 highlights the preceding multi-week compression that was the harbinger for eventual resolution - as previously highlighted market structure and sentiment favored the upside. The 2-day RTH sequence (bottom pane) highlights the anatomy of the breakout: RTH continuation from Thursday’s strong position of close with one-way initiative bid during Friday’s OpEx (confirmed by the NYSE TRIN). Breadth divergences notwithstanding, lower timeframe buyers remain in control above 4800 (-1.43%).

Bull v Bear

This Week (30d ATM IV 10.34% v 30d HV 9.85%)
Bulls will seek to extend WTF 1TFU and establish price acceptance above WHI 4874.25. Upside: 4900.00 (+0.63%) is within +1σ (W) 4947 (+1.59%).
Bears will seek to recapture DTF 1TFD on a closing basis, coinciding with closure < WMID 4810.25. Downside: GEX Flip 4800 (-1.43%) is within -1σ (W) 4795 (-1.53%).

Last Week (4869.50 MAR24 +1.09%)
Bulls will seek to extend WTF 1TFU > 4838 on a closing basis. Upside: 4841.50 ETH HI (+0.52%) is within +1σ (W) 4889 (+1.51%); 4900 is within +2σ (W) 4962 (+3.02%).
~~Bears will seek to recapture DTF 1TFD on a closing basis. Downside: GEX Flip 4780.50 (-0.75%), 4767.50 HL (-1.02%), and 4754.25 (-1.29%) are~~ ~~within~~ ~~-1σ (W) 4746 (-1.46%).~~

Indicators

‣

Markets

‣

Positioning

‣

Sentiment

‣

Volatility

‣

Breadth

‣

Disclaimer

‣

Sources