Market Wrap
Narratives
World of Overshoots: Lowest rates in 5,000 years to fastest nominal GDP recovery since WW2. Asset price overshoots are the new normal. Worst US Treasury returns since 1788 in 2022 (-17%), oil price was negative $37/bbl in April of 2020, then $123/bbl in March 2022 then collapsed to $67/bbl over the following 12 months. Bitcoin was $5,000 in January of 2020 to $68,000 in November 2021 to $16,000 in November 2022 to $29,000 today. S&P 500 from 3,300 to 2,200 to 4,800 to 3,500 to 4,600 thus far in the 2020s. AI is simply the new overshoot — Michael Hartnett, BofA
Week Ahead
Investors in the US will be closely monitoring the jobs report, ISM PMI surveys, and JOLTs' job openings. It is expected that non-farm payrolls increased by 200,000 in July, which would be the lowest figure since a decline was recorded in December 2020, indicating the potential effects of the unprecedented policy tightening delivered by the Fed in recent months.
Additionally, the second-quarter earnings season will be in full swing, featuring reports from companies such as Apple Inc, Amazon, Advanced Micro Devices, Shopify, Alibaba Group, Uber Technologies, Merck & Co, Pfizer, Gilead Sciences, Moderna, Caterpillar Inc, Starbucks Corp, The Kraft Heinz Co, Etsy, PayPal Holdings, and Airbnb.
Investors will also find interest in following the ADP employment change, second-quarter labor productivity and labor costs, factory orders, and regional industry indexes such as the Chicago PMI and Dallas Fed Manufacturing Index - TradingEconomics
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Earnings
Metric | UpDn | This Week | Prior Week | Baseline | Baseline TF |
---|---|---|---|---|---|
Forward 4-qtr Estimate | 🔵 | 230.44 | 229.94 | 228.39 | January 1, 2023 |
Forward 4-qtr PE | 🔵 | 19.9 | 19.7 | 17.2 | January 1, 2023 |
Nominal Earnings Yield | 🔴 | 5.03 | 5.07 | 5.86 | January 1, 2023 |
Options
Metric | UpDn | This Week | Prior Week | Net CHG | % CHG |
---|---|---|---|---|---|
SPX Implied Volatility | 🔴 | 10.93 | 11.05 | -0.12 | -1.09% |
SPX GEX Flip | 🔵 | 4,532.5 | 4,402.5 | 130 | 2.95% |
SPX Skew Adjusted GEX | 🔵 | 6,561,566,668 | 4,405,868,784 | 2,155,697,884 | 48.93% |
Equity Put/Call Ratio (CBOE) | 🔵 | 0.71 | 0.56 | 0.15 | 26.77% |
VIX Put/Call Ratio (CBOE) | 🔵 | 0.3 | 0.19 | 0.11 | 57.89% |
SPX/W Put/Call Ratio (CBOE) | 🔴 | 1.13 | 1.43 | -0.3 | -20.98% |
Futures
Sep E-mini S&P 500 futures settled at a contract high of 4606.50 Friday, higher by 42.25. Overall, 1,576,081 contracts were traded, with 1,573,973 done in Sep. Total open interest gained 11,438 (0.52%), with Sep adding 7,600, or 0.35%, to 2,201,487.
Option volumes were highest for the July EW 4730 call (11,244) and the July EW 4025 put (20,397). For Sep options, the 4600 calls were the most actively traded with 2,687 changing hands, and the highest volume put was the 4400 strike with 3,534 contracts done. Options with the most open interest are the Sep 4700 call with 17,965, and the July EW 3850 put with 26,394.
As measured by the 30-day at-the-money, implied volatility was moderately lower, off 0.98% to close the day at a one week low of 10.65%. The 30-day historical volatility closed the day down by 0.24% to 9.16%. The 25-delta Risk Reversal was sharply higher with the 30-day up by 0.82%, closing the session at a one week high of -2.40%.
Bull v Bear
This Week (30d ATM IV 10.65% v 30d RVOL 9.16%)Bulls will seek to recapture DTF 1TFU (> 4615.50), and ideally the WHI > 4634.50 on a closing basis. Upside: 4700 (2.03%) is marginally beyond +1σ (W) 4679.50 expected (+1.58%).Bears will seek to break the 1TFU configuration < WLO 4553.75 (-1.15%) on a closing basis. Downside: < WLO.1 4528 (-1.7%) is marginally beyond -1σ (W) 4536 expected (-1.53%).
Last Week (4606.50 SEP23 +0.91%)Bulls will seek to defend the 4550 Demand Zone, and ideally recapture DTF 1TFU > 4590 on a closing basis. Upside: > WHI 4609.25 (+0.97%) is within +1σ (W) 4638.50 (+1.62%).Bears will seek extend DTF 1TFD, and ideally break WLO 4528 (-0.81%) on a closing basis. Downside: < 4500 (-1.42%) is justwithinthe-1σ (W) 4493 expected range (-1.57%).
Indicators
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