Week of Nov 17 2024

Market Wrap

Weekly Benchmarks - @Koyfin

Weekly Factors vs. S&P 500 - @Koyfin

Weekly Performance - @Koyfin

Outlook

The latest market environment reflects an intricate balance between robust fundamentals and emerging structural challenges. The S&P 500's recent break below its post-election consolidation range, despite showing 5.4% earnings growth in Q3 2024 (led by international exposure at +12.9% versus domestic +1.5%), signals growing market anxiety about both near-term catalysts and longer-term policy implications. Technical indicators present an increasingly complex picture. The S&P 500's breach of its trading range has brought the 50-day moving average into focus as a potential support level, while maintaining key thresholds around the 3.5-4.5% neutral rate range and Treasury auction metrics. The Nasdaq 100's liquidity premium indicator remains bullish, though small cap strength (20% of Russell 2000 at new highs) is being tested by recent market weakness. Market sentiment increasingly centers on inflationary implications, amplified by investors like David Einhorn warning of an inflation inflection point ahead. Traditional market correlations continue to break down - oil prices have decoupled from breakeven inflation rates, while U.S. and European equity markets show stark divergence (S&P 500 +24% YTD versus French markets -3%). This fragmentation reflects accelerating deglobalization trends and reinforces "American Exceptionalism," though potentially at the cost of increased market vulnerability. The macro risk spectrum remains defined by an "Erdogan scenario" left tail (political pressure on Fed independence amid sticky inflation) versus a "Roaring 20s" right tail (productivity-driven growth containing inflation). The immediate focus turns to next week's housing-centric data releases, including the NAHB home builders index, housing starts and permits, and existing home sales, which could provide crucial insight into the resilience of the consumer sector. These readings, combined with Friday's S&P manufacturing and services PMIs and the Conference Board Leading Index, will test the market's conviction about economic momentum. Multiple FOMC member speeches also loom large, particularly after Powell's recent "not in a hurry" stance on rate cuts despite acknowledging "remarkably good" economic performance. Positioning shows historic US equity overweight (11-year high post-election), yet market pricing suggests limited incorporation of proposed policy changes, particularly around corporate tax cuts and deregulation. This disconnect may reflect implementation timeline skepticism, with meaningful policy impacts unlikely before late 2025. The dollar's resilience despite dovish Fed expectations highlights continued faith in US outperformance during global growth divergence. Current market dynamics suggest a cautious middle path, with strong preference for US assets but growing concern about near-term technical levels and catalyst risks.

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Macro Dashboard

Forward Earnings

Metric	UpDn	This Week	Prior Week	Baseline	Baseline TF
Forward 4-qtr Estimate	🔴	263.01	263.39	243.98	January 1, 2024
Forward 4-qtr PE	🔴	22.3	22.7	20.16	January 1, 2024
Nominal Earnings Yield	🔵	4.48	4.41	5.19	January 1, 2024

Volatility & Correlations

Metric	UpDn	This Week	Prior Week	Net CHG	% CHG
SPX Implied Volatility	🔵	12.48	11.44	1.04	9.09%
SPX GEX Flip	🔵	5,927.5	5,867.5	60	1.02%
SPX Skew Adjusted GEX	🔴	-3,467,360,973	4,039,042,620	-7,506,403,593	-185.85%
SPX/SPXW Put/Call Ratio	🔴	1.34	1.38	-0.04	-2.9%
OEX Put/Call Ratio	🔴	1	4.33	-3.33	-76.91%
VIX Put/Call Ratio	🔵	0.88	0.66	0.22	33.33%

Cross-Asset Volatility — CBOE

Cross-Asset Correlation — CBOE

S&P 500 Futures

E-mini S&P 500 futures were lower Friday with the Dec contract finishing the session at a one week low of 5896.50, down 81.75 (1.37%). Across all maturities, volume was 1,544,718, with the Dec contract seeing 1,841,583 done

Option trading centered around the Dec 6100 calls with 12,246 traded and the Nov E3A 5000 puts with volume of 34,684.

As measured by the 30-day at-the-money, implied volatility was sharply up, gaining 1.28% to close at a one week high of 12.38%. Up 0.45% to a one month high, historical volatility (as measured by the 30-day) finished at 13.13%.

Higher TF (W → D) BULLISH - Price action reversed precisely at the DTF Channel Line (see Pane 2). While the channel remains intact, it raises the broader question: Does the YTD/ATH, 6053.25 (+2.66%), mark the conclusion of a clear three-legged trend encapsulating 2024? While the new high printed during extended trading hours (ETH), suggesting unfinished business above, one could argue that the post-election move was climactic. Higher timeframe buyers recognize the necessity of backing and filling now underway, and will likely wait to buy at better prices—such as the still-rising 50-day moving average (MA)—creating a vacuum effect. But despite a weak closing position and modest VIX backwardation (VIX3M-VIX1M 10d Z-score +0.21), this pullback appears technical.

Lower TF (4H → M30) BEARISH - The 4-day triangular range that evolved from last week's climatic price action resolved to the downside with Friday's true gap breakout. The confirming downtrend remains intact on the M30 timeframe, but completed a high-odds 2-legged move with an arguably climatic breakout failure below the channel line into the close. It then retraced the channel, closing exactly at the trendline. This setup brings focus to whether the channel evolves into a trading range or outright reversal; or develops an odds-favored bear flag (signaling a third leg down). Sellers remain in control below 5954.25 (+0.98%), but we remain aware of the exaggerated moves often accompanying monthly OPEX, especially given the extent of long gamma positioning that expired on Friday.

Bull v Bear

This Week: ATM IV30 11.30% v HV 13.04% IV-HV -1.74%
Bulls will seek cessation of DTF 1TFD and ideally mitigate Friday’s true gap on a closing basis. Upside: Reclamation of 6000 (+1.76%) is within +1σ (W) 6010 (+1.92%).
Bears will seek to extend DTF 1TFD and offer inside the lowest of November’s triple HVN distributions. Downside: 50-day MA 5818.75 and < 5800 are within -1σ (W) 5787 (-1.86%).

Last Week: 5896.50 DEC24 -2.08%
~~Bulls will seek to extend WTF 1TFU on a closing basis. Upside: 6130.50 100% MM (> TR 5724.00 → 5927.25) is~~ ~~coincidental with~~ ~~+1σ (W) 5932.50 (+1.78%)~~.
Bears will seek cessation of DTF 1TFU and ideally offer below 6000 on a closing basis. Downside: October BOS 5927.25 is within -1σ (W) 5922.00 (-1.71%).

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