Market Wrap
Narratives
Given that June’s underwhelming payrolls report did nothing to dissuade the market from pricing in a 95% probability of a hike on July 26, we struggle to envision the CPI update will derail the Fed. As the market has absorbed the employment update and moved beyond the looming hike, the conversation will quickly turn to whether September’s meeting will be in play for the FOMC. In light of payrolls, the most relevant takeaways from CPI will be applied to a September hike scenario. Said differently, CPI will translate into a hawkish hike or a dovish hike as a function of the underlying details — Ian Lyngen and Ben Jeffery, BMO
Week Ahead
In the US, the primary focus will be on the CPI figures. The headline annual inflation is projected to decline to 3.1% in June from 4% in the previous month, while the core index may fall to 5% from 5.3%. Investors will also closely watch speeches by several Fed officials, hoping to gain insights into the future trajectory of monetary policy. Other economic indicators to keep an eye on include producer and foreign trade prices, the preliminary estimate of Michigan Consumer Sentiment, and the government's monthly budget numbers for June.
Finally, the second-quarter earnings season will start, with reports from prominent financial institutions such as Citigroup, JPMorgan Chase, and Wells Fargo, along with Delta Air Lines, PepsiCo, BlackRock, and UnitedHealth Group - TradingEconomics
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Earnings
Metric | UpDn | This Week | Prior Week | Baseline | Baseline TF |
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Forward 4-qtr Estimate | 🔵 | 230.26 | 224.01 | 228.39 | January 1, 2023 |
Forward 4-qtr PE | 🔴 | 19 | 19.9 | 17.2 | January 1, 2023 |
Nominal Earnings Yield | 🔵 | 5.23 | 5.03 | 5.86 | January 1, 2023 |
Options
Metric | UpDn | This Week | Prior Week | Net CHG | % CHG |
---|---|---|---|---|---|
SPX Implied Volatility | 🔵 | 12.1 | 10.7 | 1.4 | 13.08% |
SPX GEX Flip | 🔵 | 4,397.5 | 4,357.5 | 40 | 0.92% |
SPX Skew Adjusted GEX | 🔴 | 566,034,362 | 6,484,367,740 | -5,918,333,378 | -91.27% |
Equity Put/Call Ratio (CBOE) | 🔴 | 0.52 | 0.53 | -0.01 | -1.89% |
VIX Put/Call Ratio (CBOE) | 🔵 | 0.32 | 0.3 | 0.02 | 6.67% |
SPX/W Put/Call Ratio (CBOE) | 🔴 | 1.31 | 1.4 | -0.09 | -6.43% |
Futures
Sep E-mini S&P 500 futures settled at a one week low of 4434.00 Friday, losing 13.00. Overall the session saw 1,693,641 contracts change hands, with Sep volume coming in at 1,691,644. Across all maturities, open interest fell by 19,261, or 0.87%, to end the session with 2,196,125 outstanding. The Sep maturity dropped 0.91% (19,261) to finish at 2,179,321.
Option trading centered around the July E2A 4550 calls with 7,382 changing hands and the July E2B 3720 puts with volume of 26,770. Largest volumes in July option trading were seen in the 4550 calls (4,165) and the 4300 puts (6,228). Calls with the largest open interest are the July EW3 100 strike (19,591), and for the puts are the July E2B 3720 strike (26,776).
E-mini S&P 500 implied volatility ended the session moderately down as the 30-day at-the-money fell by 0.35% to close the day at 11.90%. Down by 0.31% to a twelve year low, historical volatility (as measured by the 30-day) closed the session at 10.62%.
Bull v Bear
This Week (30d ATM IV 11.90% v 30d RVOL 10.62%)Bulls will seek to defend WLO.1 4368.50 (-1.48%) on further weakness. Upside: > WHI 4494 (+1.35%) and ideally 4500 on a closing basis are within the +1σ (W) 4512.50 (+1.77%).Bears will seek to break WLO.1 on a closing basis. Downside: < JUN VAL 4350 (-1.89%), marginally beyond the -1σ (W) expected range (-1.70%), begins repair of the Departure Gap.
Last Week (4434.00 SEP23 -0.03%)Bulls will seek to clear and build price acceptance > 4500 on a closing basis. Upside: > 4631 Q222 HI (+2.2%) is marginallywithinthe +2σ (W) 4634 (+3.25%).Bears will seek to mean revert inside the trailing 4w VA (4371 → 4498). Downside: 4418.50 WPOC (-1.55%) coincides with the -1σ (W) expected range (-1.57%).
Indicators
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