Week of Feb 04 2024

Market Wrap

Weekly Benchmarks - @Koyfin

Weekly Factors vs. S&P 500 - @Koyfin

Weekly Performance - @Koyfin

Narratives

While there will be another jobs update before the FOMC meeting in March, January’s figures ensure that even a disappointment in February will be easily dismissed with sufficient room for a giveback period of below-trend jobs growth. As a result, we struggle to see any high-probability path to a March cut and view the 24% odds currently priced into the futures market as overly ambitious — Ian Lyngen and Vail Hartman, BMO

It’s not that we think a soft landing is out of the question. Nor do we view deep rate cuts as impossible. It’s that these outcomes are priced into both equities and rates, which could cap upside even if the macro-policy trajectory evolves in line with the consensus. On the other hand, if the soft landing scenario does not play out as markets currently think, then there would be material downside - JPMorgan

One must assume continuous margin expansion for decent positive EPS growth in ‘24-’25. Bottom-up analysts’ earnings estimate for 2024 EPS stands at $243 for the S&P 500, implying a PE multiple of above 20 - so the implied 11% profit growth for this year might be too optimistic. But a more realistic 2024 EPS of $220-$230, implies an even higher multiple of between 21-22 currently - JPMorgan

The price action in 2024 suggests we’re either coming out of a recession or in bubble. Bonds master, stocks servant: except in bubbles and deflation. Yields down = Nasdaq up in Q4 but the script flipped to Nasdaq up = yields up in the first four weeks of 2024. And for regional bank sentiment, the zeitgeist now says bank deflation is contagiously liquidity-positive for risk assets - Bank of America

Week Ahead

Next week, investors eagerly anticipate earnings reports from a range of major companies, including Amgen, Alibaba, ARM Holdings, Caterpillar, Eli Lilly, Ford Motor, McDonald's, PayPal, Pinterest, Estee Lauder, Spotify, Walt Disney, Philip Morris, PepsiCo, Uber, S&P Global, and Conoco Phillips. Remarks from various policymakers will also be examined for additional insights into the Federal Reserve's monetary outlook.

In terms of economic data from the United States, the ISM Services PMI survey is expected to show an increase in activity growth for January, after a significant slowdown in December. Foreign trade data, RCM/TIPP Economic Optimism Index, and the final reading of S&P Global Services PMI will also be of interest to investors.

Additionally, in North America, important data includes Canada's employment figures, Ivey PMI survey, and foreign trade. In Latin America, investors will monitor Mexico's inflation rate and consumer morale, and Brazil's CPI data, trade balance, and retail sales. (Source: Trading Economics)

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Calendar (UTC-4)

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Macro Dashboard

Earnings

Metric	UpDn	This Week	Prior Week	Baseline	Baseline TF
Forward 4-qtr Estimate	🔴	241.97	242.61	243.98	January 1, 2024
Forward 4-qtr PE	⚪️	20.2	20.2	20.16	January 1, 2024
Nominal Earnings Yield	🔴	4.88	4.96	5.19	January 1, 2024

Options

Metric	UpDn	This Week	Prior Week	Net CHG	% CHG
SPX Implied Volatility	🔴	10.43	10.87	-0.44	-4.05%
SPX GEX Flip	🔵	4,952.5	4,877.5	75	1.54%
SPX Skew Adjusted GEX	🔵	-4,114,526,777	-4,746,293,052	631,766,275	13.31%
Equity Put/Call Ratio (CBOE)	⚪️	0.62	0.62	0	0%
VIX Put/Call Ratio (CBOE)	⚪️	0.9	0.9	0	0%
SPX/W Put/Call Ratio (CBOE)	⚪️	1.3	1.3	0	0%

Skew-Adjusted Gamma by Strike - @tradevolatility

Skew-Adjusted GEX Trend - @tradevolatility

Implied Volatility Trend - @tradevolatility

Put/Call OI Trend - @tradevolatility

Futures

March E-mini S&P 500 futures closed at a contract high of 4980.25 Friday, higher by 51.75 or 1.05%. Overall, 1,964,998 contracts changed hands, with 1,957,796 traded in March. Across all maturities, open interest gained 6,797 (0.30%), with March higher by 4,004, or 0.18%, to 2,265,970.

Option trading centered around the Feb E1A 5000 calls with 24,481 traded and the Feb E1A 4175 puts with volume of 101,986. Greatest volumes in March option trading were seen in the 5000 calls (5,871) and the 4600 puts (4,854). Options with the highest open interest are the Feb EW3 100 call with 21,862, and the Feb E1A 4175 put with 101,955.

As measured by the 30-day at-the-money, implied volatility closed the day lower, down by 0.33% to end the session at a one week low of 10.85%. The 30-day historical volatility ended the session dropping 0.68% to 10.80%.

Higher TF (W → D) BULLISH - The multi-week acceptance of new highs pulled January's value above and beyond December, confirming higher timeframe breakout and trend resumption. Pullbacks are being bought as tests below HVNs keep getting reclaimed. Momentum factors drove the price action through January (+5.99% MTUM / SPY) and signaled a continuation into the close of the month (+1.99%). All timeframes (quarterly, monthly, weekly, daily) remain synchronized in the upward direction. Higher timeframe buyers maintain control above the strong weekly low (WLO) of 4886 (-2.29%).

Lower TF (3H → M30) BULLISH - Last week, a textbook secondary test of the W04 breakout was observed. Buyers once again became responsive just below WLO.1 as a result of the FOMC-catalyzed liquidation. The reversal was strong enough to break out above the 4866 → 4957.25 swing structure (Pane 2) on a closing basis. As always, we will watch for value to continue its ascent on the weekly timeframe. Also critical is the continued rise of SPX GEX, which has now established a concentration at the 5000 strike. The cessation of both WTF 1TFU and positive GEX configuration on a closing basis would signal a change in the lower timeframe market structure.

Bull v Bear

This Week (30d ATM IV 10.85% v 30d HV 10.80%)
Bulls will seek to extend WTF 1TFU and establish price acceptance above 5000. Upside: 5013.75 (61.8%) breakout extension is is well within +1σ (W) 5062.00 (+1.64%).
Bears will seek to recapture DTF 1TFD and recapture negative GEX below 4900 on a closing basis. Downside: WLO 4866 (-2.29%)is beyond -1σ (W) 4900 (-1.61%).

Last Week (4980.25 MAR24 +1.29%)
Bulls will seek to extend WTF 1TFU and establish price acceptance above WHI 4934.25. Upside: 4977 Put Wall (+1.24%) is within +1σ (W) 4994 (+1.58%).
~~Bears will seek to recapture DTF 1TFD and break below WVAL 4883 on a closing basis. Downside: GEX Flip 4864.50 (-1.05%) is~~ ~~within~~ ~~-1σ (W) 4841 (-1.53%).~~

Indicators

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