Market Wrap
Narratives
Last year’s winners (so, low vol names, defensives and quality) are under pressure, concurrent with rallies across some of 2022’s consensus “trash” shorts, which are swept up in an increasingly speculative, unstable squeeze. Stocks have been crashing-up on a force-in, with all-time record call volumes seen yesterday in US equities options, yet against mechanical risk management-induced de-grossing as evidenced by multiple Momentum / Low Risk / 1m Reversal Factor implosions. Funds are trying to net-up, but the capitulatory cover and grab is contributing to the increase in implied vol, which in turn feeds into gross-down pressures, as your portfolio vol expands through your risk budget - Charlie McElligott, Nomura
Week Ahead
The week will be soft in terms of economic data in the US but very busy with earnings. Activision Blizzard, Fiserv, Vertex Pharmaceuticals, CVS Health, Uber, Walt Disney, AbbVie, PayPal, PepsiCo, and Philip Morris International are the leading US companies to publish earnings reports. The University of Michigan will release its preliminary consumer-sentiment index for January. The sentiment likely improved for a third consecutive month to 65, with inflation expectations prolonging their downward trend. Also, investors will follow the Commerce Department trade balance report. The trade gap in goods and services must have widened to USD 68.6 billion in December 2022 from USD 61.5 billion in the previous month, which was the lowest deficit since September 2020. Finally, initial and continuing jobless claims numbers will fuel the debate on whether the job market is cooling or could still surprise on the upside - TradingEconomics
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Earnings
Metric | UpDn | This Week | Prior Week | Baseline | Baseline TF |
---|---|---|---|---|---|
Forward 12-mo Estimate | 🔴 | 223.28 | 225.02 | 230.43 | September 30, 2022 |
Forward 12-mo PE | 🔵 | 18.5 | 18 | 15.5 | September 30, 2022 |
Nominal Earnings Yield | 🔴 | 5.4 | 5.53 | 6.43 | September 30, 2022 |
Options
Metric | UpDn | This Week | Prior Week | Net CHG | % CHG |
---|---|---|---|---|---|
Implied Volatility | ⚪️ | 16.2 | 16.5 | -0.3 | -1.82% |
Call Skew | 🔵 | -4.1 | -4.5 | 0.4 | 8.89% |
GEX Flip | ⚪️ | 4,047.5 | 4,002.5 | 45 | 1.12% |
Total GEX | 🔴 | 16,571,518,846 | 18,202,823,219 | -1,631,304,373 | -8.96% |
Skew Adjusted GEX | 🔴 | 4,744,425,846 | 5,211,468,288 | -467,042,442 | -8.96% |
Put/Call Ratio | ⚪️ | 1.91 | 1.94 | -0.03 | -1.55% |
Futures
Friday's E-mini S&P 500 market was lower with the March contract down by 43.75, or 1.04%, to 4147.75. Combined volume came in at a one month high of 2,362,016, with the March contract seeing a heavy 2,354,996 traded. Across all maturities, open interest dropped 3,380, or 0.16%, to 2,083,647. March fell 5,109 (0.25%), finishing at 2,059,826.
Option trading centered around the Feb EW2 4200 calls with 6,236 done and the Feb E1A 3650 puts with volume of 17,325. In March options, the highest volume call was in the 4300 strike with 3,252 changing hands, and the 4000 put leads with volume of 9,055. Calls with the highest open interest are the Feb EW3 100 strike (38,109), and for the puts are the March 3600 strike (38,791).
Implied Volatility ended the day slightly up with the 30-day at-the-money gaining 0.0732%, to settle at 15.83%. Historical volatility (30-day) settled at 17.01%, gaining 0.0619%, to a one week high.
Bull v Bear
This Week (30d ATM 15.83% v 16.32% p)Bulls will seek to recapture > FRI HI 4194 (+1.12%) and ideally establish price acceptance > 4200 (+1.26%). Upside: WHI 4208.50 (+1.46%); 22VAH 4240 (+2.22%); recapture Q421 LO 4293 (+3.5%); 4300 (+3.67%) are within +2σ (W) 4331.Bears will seek to retrace and offer back into the DEC range < 4141.50 (-0.15%) and ideally establish price acceptance below 4100 (-1.15%). Downside: GEX Flip 4079. (-1.66%); WVPOC 4053 (-2.27%); WVAL 4016 (-3.17%) are within -2σ (W) 3975.
Last Week (4147.75 MAR23 +1.53%)Bulls will seek to establish price acceptance > WHI 4109.25 (+0.61%) and ideally recapture the DEC HI 4141.50 (+1.4%) → FEB LO 4141.00. Upside: Q422 HI 4180 (+2.34%); 4200 (+ 2.83%); ‘22 YVAH 4243.50 (+3.9%) are within +2σ (W).Bears will seek to retrace and hold prior week value, ideally below 4057.25 and target a sweep to WVAL 4009.75 (-1.82%). Downside: 4000 (-2.06%); WLO 3963.25 (-2.96%); 200d MA 3957 (-3.12%); 50d MA 3943 (-3.46%) are within -2σ (W).
Indicators
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