Week of Apr 07 2024

Market Wrap

Weekly Benchmarks - @Koyfin

Weekly Factors vs. S&P 500 - @Koyfin

Weekly Performance - @Koyfin

Narratives

Investors are asking whether the divergence in performance among the largest stocks will be reflected in Q1 operating results. The divergence witnessed between those four companies (Nvidia and Meta on one side of the Magnificent 7, Tesla and Apple on the other) is a reflection of the varied forward outlooks. It’s not unfair to characterize the US equity market as a tech/AI bubble depending on your definition of bubble, but the big question is whether the rest of corporate America will catch up or whether tech+ Mag 7 will catch down — David Kostin, Goldman Sachs

Investors will be looking for answers to three questions during Q1 earnings: 1) What will results indicate about the strength of the consumer?; 2) Will the largest S&P stocks exceed lofty consensus expectations?; 3) Will results show continued momentum in artificial intelligence?- Goldman Sachs

MMF funds took in nearly $82 billion over the latest reporting period, the largest influx in three months, which overlapped quarter-end. Inflows to MMFs have risen in anticipation of the first cut over the past five rate-cutting cycles, then slowed meaningfully once the Fed started cutting rates - Bank of America

Historically, periods of high concentration are more often followed by a catch up of the other stocks in the index rather than a catch down. But, failure to meet elevated growth expectations sparked the downfall of the largest stocks at the height of the Tech Bubble despite relatively slim chances of a dot-com redux - Goldman Sachs

Week Ahead

The upcoming week in the US features the FOMC meeting minutes, the March CPI report, and the preliminary Michigan consumer sentiment reading for April. Investors will closely examine the March minutes and speeches from various Fed officials to gauge the possible timing of interest rate cuts this year, particularly following the release of robust jobs data this week.

As for economic data, headline inflation is set to rise for a second straight period to 3.4%, while the core rate is predicted to fall to 3.7%, its lowest since April 2021. On a monthly basis, both headline and core rates are expected to increase by 0.3%, a decrease from the 0.4% rise in February.

Additionally, the consumer confidence index is forecasted to slightly drop to 79.0 in April from a near three-year peak of 79.4 in the prior month. Other areas of focus will include producer and foreign trade prices, the government's monthly budget statement, and the RCM/TIPP Economic Optimism Index. (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	🔵	251.58	242.94	243.98	January 1, 2024
Forward 4-qtr PE	🔴	20.6	21.6	20.16	January 1, 2024
Nominal Earnings Yield	🔵	4.84	4.62	5.19	January 1, 2024

Options

Metric	UpDn	This Week	Prior Week	Net CHG	% CHG
SPX Implied Volatility	🔵	13.36	10.47	2.89	27.6%
SPX GEX Flip	🔵	5,207.5	5,197.5	10	0.19%
SPX Skew Adjusted GEX	🔵	-407,214,929	-1,630,502,938	1,223,288,009	75.03%
Equity Put/Call Ratio	🔵	0.71	0.56	0.15	26.789999999999996%
VIX Put/Call Ratio	🔵	1.13	0.27	0.86	318.52%
SPX/W Put/Call Ratio	🔵	1.66	1.39	0.27	19.42%

Skew-Adjusted Gamma by Strike - @tradevolatility

Skew-Adjusted GEX Trend - @tradevolatility

Implied Volatility Trend - @tradevolatility

Put/Call OI Trend - @tradevolatility

Futures

E-mini S&P 500 futures were higher Friday with the June contract finishing the session at 5253.00, up 55.75 (1.07%), over a sizable trading range. Overall, 1,911,081 contracts were traded, with 1,908,306 done in June. Total open interest added 22,890 (1.09%) to end the session with 2,114,607 outstanding. The June maturity increased 1.07%, or 22,890, to finish at 2,094,250.

The April E2B 4325 put saw the most changing hands with 47,602 contracts done. For April options, the 5300 calls were the most active with 3,348 done, and the high volume put was the 5000 strike with 7,966 contracts changing hands. Options with the highest open interest are the May EW3 5400 call with 52,655, and the April E2B 4325 put with 104,008.

As measured by the 30-day at-the-money, implied volatility finished the day down, dropping 0.61% to settle at 13.32%. Up by 0.48%, historical volatility (as measured by the 30-day) finished the day at 10.01%.

Higher TF (W → D) BULLISH - Last week, the higher timeframe trend paused amidst a bout of volatility, signaled by a liquidity grab above the prior ATH. The pullback corrected overbought conditions, mitigated the naked March VPOC, and repaired the remainder of the multi-week Fair Value Gap. Friday’s short covering rally was sufficient to print a neutral position of close, but left behind a non-excess WLO suggestive of unfinished business below. That said, the higher timeframe trend structure remains bullish > March VAL 5100 (-3.00%) coincidental with the rising 50d MA.

Lower TF (3H → M30) NEUTRAL - The lower timeframe has entered a corrective phase, confirmed by the cessation of WTF 1TFU. However, Friday's recovery price action, which overlapped and closed back into the initial impulse wave (5333.50 → 5235.00) suggests nothing sinister is yet underway. Lower timeframe sellers remain in control, however, below Thursday's high of 5308.50 (+1.06%), with supply zones overhead and a targetable weekly low of 5191.50 (-1.17%). The GEX regime also remains negative at the margin (5256), coinciding with Friday's neutral closing position.

Bull v Bear

This Week (30d ATM IV 13.32% v 30d HV 10.01%)
Bulls will seek to recapture DTF 1TFU and ideally the 5308.50 HH on a closing basis. Upside: WHI & ATH 5333.50 (+1.53%) is within +1σ (W) 5353.00 (+1.90%).
Bears will seek to expand the negative GEX < 5257 and ideally extend DTF 1TFD on a closing basis. Downside: < Poor WLO 5191.50 (-1.17%) is within -1σ (W) 5156.00 (-1.85%).

Last Week (5253.00 JUN24 -1.05%)
~~Bulls will seek to extend WTF 1TFU > 5322.75 (+0.27%) on a closing basis. Upside: 5400 and 150% HTF PO 5461.50 (+2.88%) is~~ ~~above~~ ~~+1σ (W) 5390.00 (+1.72%).~~
Bears will seek to recapture DTF 1TFD and ideally offer < 5292.25 on a closing basis. Downside: < FVG LO 5244.75 is within within -1σ (W) 5229.00 (-1.50%).

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