Week of Apr 30 2023

Market Wrap

EOW 17 - Benchmarks

SPX (D) - Trailing 12mo and +/- 1σ Expected Weekly Range (+/- 2.2% 4077.8 → 4261.3)

VX Surface - RVOL Spreads - VVIX / VIX Ratio - Trailing 12mo

Narratives

Equities will soon enter a weak seasonal stretch of the year, which many investors know by the adage “sell in May and go away.” Since 1950, the S&P 500 has had a 62% hit rate of positive returns in May (vs. 61% across all months) with a +1.0% median return, in line with the overall monthly median. However, May also marks the start of the historically weakest part of the year for US equities. The S&P 500 has averaged an annualized return of just 5% from May through October, as compared with 13% from January through April and 17% from November through December. Although investors know that past performance does not guarantee future results, popular narratives can often become self-fulfilling prophecies — David Kostin, Goldman Sacgs

Corporate earnings in America are seen falling 9% YoY for Q1, 6% for Q2, then inflecting for the better after that. Our indicators (above) which map very well with trailing EPS growth have suggested a steep decline is on the horizon and inform our bearish outlook for equities - Morgan Stanley

Corporate earnings have come in better than expected. In aggregate, profits are down 5% YoY with two-thirds of market cap reporting. Consensus expected a 9% decline headed into earnings season. Revisions have inflected for the better as well - Goldman Sachs

BofA is still bearish. The economic ambiguity of 2023 is set to end with a crack in the labor market and an EPS recession. The S&P is a fade beyond 4200 given that stocks are pricing in just a 4% drop in earnings and 210bps of rate cuts peak-to-trough - Bank of America

Week Ahead

The April jobs report and the Federal Reserve's interest-rate decision are among the most anticipated news items in the coming week. The US economy is expected to have added 181k jobs last month, which is the lowest number since December 2020. The unemployment rate is likely to have increased to 3.6%. Additionally, the average hourly earnings are forecasted to have grown by 0.3% month-over-month, which is the same as the previous period. The Labor Department will also release March data on job openings, quits, hires, and layoffs.

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Calendar (UTC-4)

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Major Economies

Earnings

Metric	UpDn	This Week	Prior Week	Baseline	Baseline TF
Forward 12-mo Estimate	🔵	225.91	225.86	228.39	January 1, 2023
Forward 12-mo PE	🔵	18.5	18.3	17	January 1, 2023
Nominal Earnings Yield	🔴	5.42	5.46	5.86	January 1, 2023

Options

Metric	UpDn	This Week	Prior Week	Net CHG	% CHG
SPX Implied Volatility	🔴	13.1	13.62	-0.52	-3.82%
SPX GEX Flip	🔴	4,122.5	4,127.5	-5	-0.12%
SPX Skew Adjusted GEX	🔵	14,540,911,491	2,517,420,717	12,023,490,774	477.6%
Equity Put/Call Ratio (CBOE)	🔵	0.76	0.61	0.15	24.59%
VIX Put/Call Ratio (CBOE)	🔵	0.37	0.26	0.11	42.31%
SPX/W Put/Call Ratio (CBOE)	🔴	1.27	1.41	-0.14	-9.93%
OEX Put/Call Ratio (CBOE)	🔵	2.57	0.3	2.27	756.67%

SPX Net Skew-Adjusted Gamma by Strike - @tradevolatility

SPX Skew-Adjusted GEX Trend - @tradevolatility

SPX Implied Volatility - @tradevolatility

SPX Put/Call OI - @tradevolatility

Futures

June E-mini S&P 500 futures closed at a one month high of 4188.50 Friday, up by 34.75. Overall the session saw 1,757,046 contracts done, with June volume coming in at 1,753,803. Total open interest closed the session at a one month high of 2,307,950, adding 31,798 (1.40%). June open interest increased 31,337, or 1.39%, to 2,279,944.

The May E1A 3450 put saw the most changing hands with 35,608 contracts done. In June options, the most actively traded call was the 4300 strike with 3,108 done, and the 3900 put leads with volume of 4,154. Option open interest is greatest for the June EW3 100 calls at 29,337, and the May E1A 3450 puts at 63,102.

E-mini S&P 500 implied volatility finished the session sharply down as the 30-day at-the-money lost 1.43% to end at 12.87%, a twelve year low. Historical volatility (30-day) closed the day at 12.84%, off by 0.0365%.

Longer TF (W → D) NEUTRAL - We continue to observe intermediate-term consolidation between the December 3788.50 low and February 4208.50 high, with a bullish lean based on the strong position of the monthly close. The odds now favor testing 4208.50 (+0.48%), despite buyers failing to clear WHI.1 at 4198.25 (+0.23%). That said, this multi-month intermediate-term trading range remains inside a long-term structure between the 2022 low of 3502.00 and the Q3 2022 high of 4327.50, indicative of balance.

Shorter TF (3H → M30) BULLISH - The shorter timeframe turned squarely bullish last week and caused a series of structural breaks (BOS above) in a +3% rise from Thursday → Friday. The updated swing structure is now Friday’s LO 4131.50 (-1.36%) → WHI.1 4198.25 (+0.23%). Cessation of WTF 1TFD on a closing basis opens the gate to print a (new) YTD HI > 4208.50 (+0.48%), well within the +1σ (+2.73%) expected range. The shorter-term structure remains bullish above Friday’s RTH LO 4143.75 (-1.07%).

Bull v Bear

This Week (30d ATM 12.87% v 13.86% p)
Bulls will seek to recapture WTF 1TFU > WHI.1 4198.25 and cause a break of structure and new YTD HI > 4208.50 (+0.48%). Upside: 4250 (1.47%) marginally within +1σ (W) 4267 (+1.87%).
Bears will seek to recapture DTF 1TFD < 4143.25 (-1.07%). Downside: 2023 VAH 4020 (-1.64%); WVAL 4105 (-1.99%); WLO~50d MA 4068.75 (-2.05%) are within -2σ (W) 4037 (-2.8%).

Last Week (4188.50 JUN23 +0.76%)
Bulls will seek to recapture and gain price acceptance > WHI ~4200 (+1.04%). Upside: YTD HI 4208.50 (+1.24%); 4250 (2.24%) marginally above +1σ (W) 4239 (+1.98%).
Bears will seek to extend < WLO 4135.25 (-0.52%). Downside: JAN HI 4109.25 (-1.14%); WLO.1 4098.75 (-1.4%); 50d MA 4069 (-2.11%) marginally below -1σ (W) 4076 (-1.94%).

Indicators

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Markets

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Positioning

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Sentiment

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Volatility

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Breadth

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Disclaimer

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Sources