Week of Mar 17 2024

Market Wrap

Weekly Benchmarks - @Koyfin

Weekly Factors vs. S&P 500 - @Koyfin

Weekly Performance - @Koyfin

Sentiment

The market sentiment at the close of Week 11, 2024 is cautiously optimistic, with a focus on AI's impact, inflation, and interest rates. The market is optimistic about AI but not at extreme levels seen in previous bubbles. Inflation and interest rates are causing uncertainty, leading to a repricing of risk assets. Options activity is high, indicating potential significant moves. There are signs of a broadening rally beyond tech and AI-related stocks. Risks include persistent inflation and failure to meet growth expectations. The market is balancing AI opportunities with inflation and monetary policy risks. Overall sentiment is modestly positive.

Macro is shifting. Stubborn US price growth and the labor market is finally cracking. US in Q4 = 3% growth, 2% inflation = Goldilocks, but US in Q1 = <2% growth & 3-4% inflation = Stagflation. This explains why oil is now handily outperforming the Nasdaq YTD - Bank of America

Nearly $31 billion went to US large-caps and more than $8 billion to small-caps. Tech-focused funds saw one of their largest inflows ever on the heels of a record outflow the prior weeks. The last time flows were this robust was 2021, year of the “everything bubble” - Bank of America

Going forward, we expect earnings to decelerate for the Magnificent 7, but accelerate for the other 493, with the growth differential essentially merging by 4Q24. We expect the narrowing growth differential to be a catalyst for the market to broaden out - Bank of America

Week Ahead

The US Federal Reserve is likely to maintain the current interest rates for a fifth consecutive meeting next Wednesday, given the robust labor market and a gradual decline in inflationary pressures. Investors will scrutinize the Federal Open Market Committee's (FOMC) economic forecasts and the 'dot plot' interest rate projections for hints on the timing of any rate cuts, particularly after this week's unexpectedly high CPI and PPI figures led traders to dial back expectations for future rate cuts.

The March PMI survey is predicted to show a slight decrease in manufacturing sector growth following the strongest expansion since July 2022 recorded in February. Additionally, the growth rate in the service sector is expected to decelerate slightly for the second month in a row.

In terms of housing, starts are likely to rebound to 1.447 million from January's five-month low, and building permits should rise to 1.5 million, their highest level since last August. Conversely, existing home sales are projected to drop to 3.94 million in February from 4.0 million the previous month. Other important data releases to watch out for include Q4 current account, homebuilder sentiment, and the Philadelphia Fed Manufacturing 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	🔵	243.31	243.29	243.98	January 1, 2024
Forward 4-qtr PE	⚪️	21	21	20.16	January 1, 2024
Nominal Earnings Yield	🔵	4.76	4.72	5.19	January 1, 2024

Options

Metric	UpDn	This Week	Prior Week	Net CHG	% CHG
SPX Implied Volatility	🔵	12.16	12.14	0.02	0.16%
SPX GEX Flip	🔴	5,122.5	5,123.7	-1.2	-0.02%
SPX Skew Adjusted GEX	🔵	223,826,368	-1,212,983,924	1,436,810,292	118.45%
Equity Put/Call Ratio	🔵	0.61	0.56	0.05	8.93%
VIX Put/Call Ratio	🔴	0.19	0.48	-0.29	-60.43%
SPX/W Put/Call Ratio	🔵	1.42	1.4	0.02	1.43%

Skew-Adjusted Gamma by Strike - @tradevolatility

Skew-Adjusted GEX Trend - @tradevolatility

Implied Volatility Trend - @tradevolatility

Put/Call OI Trend - @tradevolatility

Futures

June E-mini S&P 500 futures settled at a one week low of 5182.75 Friday, dropping 35.25. Overall, 1,973,470 contracts were traded, with 1,927,775 done in June. Total open interest shed 1,990 (0.0732%) to end the session with 2,717,188 outstanding. The June maturity dropped 0.30%, or 1,990, to finish at 2,044,911.

Option trading centered around the May EW3 5400 calls with 111,312 done and the March E3B 4250 puts with volume of 78,750. For April options, the 5350 calls had the highest volume with 78,310 traded, and the most actively traded put was the 3750 strike with 5,546 contracts done. Calls with the most open interest are the May EW3 5420 strike (60,935), and for the puts are the March E3B 4250 strike (81,289).

E-mini S&P 500 implied volatility closed higher as the 30-day at-the-money increased by 0.47% to end at 12.17%. Historical volatility (30-day) ended at 12.25%, off 0.0205%, to a one week low.

Higher TF (W → D) BULLISH - The higher timeframe trend structure remains squarely bullish and confirmed through the volatile monthly OPEX with continued ascent of outside and above March value. Higher timeframe structures (quarterly, monthly) remain synchronized in the upward direction, but the weak position of last week’s close and declining momentum signals risk of commencing a pullback facilitated by a lower timeframe countertrend - in which case we will monitor for responsiveness between 5100→ 5123.

Lower TF (3H → M30) NEUTRAL - Friday’s outside-day reversal resulted in the cessation of DTF 1TFU. Lower timeframe pullbacks have thus far respected the ascending multi-week demand line (Pane 1), now converging with the closely observed 5172 TR MID. Loss of 5172 would confirm the breakout failure above 5220.75 and create scope for retargeting TR LO 5123, well within the -1σ weekly implied range. A breakdown < TR LO 5123 risks a deeper pullback and retest of the February VAH & 5066.50 break of structure (-2.24%).

Bull v Bear

This Week (30d ATM IV 12.17% v 30d HV 12.25%)
Bulls will seek to defend 5142 MVPOC and ideally bid back above MVAH 5242.50 (+1.15%). Upside: WHI 5253.50 (+1.37%) is within +1σ (W) 5272.00 (+1.72%).
Bears will seek to recapture WTF 1TFD and ideally offer below MVAL 5131 (-0.99%). Downside: 3wk TR LO 5123 (-1.15%) is within -1σ (W) 5098 (-1.64%).

Last Week (5182.75 JUN24 -0.19%)
Bulls will seek to defend 5172 and ideally recapture 5220.75 on a closing basis. Upside: WHI 5257.75 (+1.25%) is within +1σ (W) 5282.00 (+1.72%).
Bears will seek to recapture DTF 1TFD and ideally < Swing MID 5172 on a closing basis. Downside: WLO.1 5123.00 (-1.34%) is within -1σ (W) 5105.50 (-1.68%).

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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Disclaimer

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Sources