Week of Apr 28 2024

Market Wrap

Weekly Benchmarks - @Koyfin

Weekly Factors vs. S&P 500 - @Koyfin

Weekly Performance - @Koyfin

Narratives

Micro over macro was the story of the week. The micro was earnings. The macro was yet another acceleration in the ongoing re-pricing across the US rates complex, where 10s were cheaper by another 8bps headed into the March PCE release on April 26 despite a generally well received auction series. The lion’s share of the selloff extension in 10s was down to reals, which neared 2.30% on the eve of what some worried would be a destabilizing read on the Fed’s preferred price gauges for March — Charlie McElligott, Nomura

Until early April, the selloff this year had largely been driven by improving growth expectations, an important reason why equity markets and credit spreads have been so resilient to the increase in yields. But since the March US CPI beat, the imprint on macro markets has largely been consistent with a hawkish policy shock, while the growth upgrade has stalled or fallen- Goldman Sachs

Anything But Bonds (ABB) bull = "long monopolies, short leverage" in stocks; top 10 US stocks = record 34% of S&P 500 market cap, top 10 global stocks = record 23% of MSCI ACWI (2841 constituents); narrow mega-cap “growth” leadership intact until real 10-year yields of 2½-3% and/or higher yields combine with higher credit spreads to threaten recession - Bank of America

The 2020s are the era of big government intervention, whether it’s stimulus checks during a public health crisis, rebates and subsidies to cushion the blow from war-related energy volatility or student debt forgiveness as a kind of partial offset for soaring monthly housing costs, governments are running the biggest-ever non-recession deficits - Bank of America

Week Ahead

Next week, the spotlight in the United States will be on the US FOMC meeting, where borrowing costs are expected to remain at record lows. Investors will scrutinize Chair Powell's remarks for insights on the anticipated timing and number of interest rate cuts this year, especially in light of ongoing inflationary pressures.

In terms of economic data, non-farm payrolls are predicted to rise by 210K in April, down from 303K in March. The unemployment rate is likely to stay steady at 3.8%, with monthly wage growth anticipated to remain at 0.3%. Other significant releases include April's ISM PMI surveys, JOLTs job openings, foreign trade, first-quarter employment cost index and productivity, Case-Shiller home prices, ADP Employment Change, factory orders, and regional activity indexes like the Dallas Fed Manufacturing Index and Chicago PMI.

Furthermore, the first-quarter earnings report season will be in high gear, with updates expected from several major companies such as Apple Inc, Amazon, 3M Co, Coca-Cola, McDonald's Corp, Starbucks Corp, Advanced Micro Devices, PayPal Holdings, Automatic Data Processing, The Estee Lauder Companies, Mastercard, Pfizer, Amgen, Moderna, and Novo Nordisk. (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	🔵	252.55	252.51	243.98	January 1, 2024
Forward 4-qtr PE	🔵	20.2	19.9	20.16	January 1, 2024
Nominal Earnings Yield	🔴	4.95	5	5.19	January 1, 2024

Options

Metric	UpDn	This Week	Prior Week	Net CHG	% CHG
SPX Implied Volatility	🔴	12.89	15.5	-2.61	-16.84%
SPX GEX Flip	🔴	5,092.5	5,112.5	-20	-0.39%
SPX Skew Adjusted GEX	🔵	308,708,519	-3,684,806,070	3,993,514,589	108.39%
Equity Put/Call Ratio	🔴	0.55	0.65	-0.1	-15.39%
VIX Put/Call Ratio	🔵	1.37	0.66	0.71	107.58%
SPX/W Put/Call Ratio	🔴	1.42	1.44	-0.02	-1.39%

Skew-Adjusted Gamma by Strike - @tradevolatility

Skew-Adjusted GEX Trend - @tradevolatility

Implied Volatility Trend - @tradevolatility

Put/Call OI Trend - @tradevolatility

Futures

Friday's E-mini S&P 500 market was higher with the June contract higher by 49.25 to 5131.50, a one week high. Overall the session saw 1,458,678 contracts done, with June volume coming in at 1,455,855. Across all maturities, open interest shed 26,633 (1.28%), with June down by 28,236, or 1.38%, to 2,019,869.

Option trading centered around the April E5A 5130 calls with 7,556 done and the April EW 4225 puts with volume of 34,674. In May options, the highest volume call was in the 5200 strike with 1,334 done, and the 4800 put leads with volume of 2,276. Calls with the highest open interest are the May EW3 5400 strike (54,872), and for the puts are the April EW 4225 strike (50,520).

E-mini S&P 500 implied volatility ended the session sharply lower as the 30-day at-the-money dropped 1.29% to finish at 12.87%, a one week low. Historical volatility (30-day) closed the day at 11.76%, up by 0.26%, to a one month high.

Higher TF (W → D) NEUTRAL - Corrections usually consist of three waves: first there is an initial impulse wave of selling, which is then followed by a wave 2 relief rally. Typically, although not always, a third wave of selling follows that retests or breaks the low of wave 1. Presuming a wave 2 relief rally has been in play this past week, the key question is how long will it last? How much, if any, of wave 1 will be retraced, or further extended? In this context, the 50d MA (+0.63%), also coincidental with the midpoint of wave 1, will be viewed by many as the line in the sand.

Lower TF (4H → M30) NEUTRAL - The lower timeframe facilitated a higher timeframe (wave 2) relief rally, which closed constructively at the base of the prominent 5150 → 5187 FVG. Notice that Friday’s pullback low coincided with mitigating approximately half of newly formed supportive 5074.50 → 5116.75 FVG before closing adjacent to the 5128.75 BOS. GEX is possibly transitioning into positive territory, and buyers have regained interim control above 5086.50 FVG → 5076.25 WMID (-1.08%). But the overall correction structure remains intact below 5250 (+2.31%).

Bull v Bear

This Week (30d ATM IV 12.87% v 30d HV 11.76%)
Bulls will seek to establish price acceptance above the 50d MA 5164 on a closing basis. Upside: 5200 (1.33%) is within +1σ (W) 5223 (+1.78%).
Bears will seek to recapture DTF 1TFD and ideally 5100 on a closing basis. Downside: WVAL 5061.25 (-1.37%) is within -1σ (W) 5043 (-1.72%).

Last Week (5131.50 JUN24 +2.49%)
Bulls will seek to establish price acceptance > WVAL 5038.50 and ideally recapture DTF 1TFU on a closing basis. Upside: WVAH 5120 is beyond +1σ (W) 5116 (+2.24%).
~~Bears will seek to extend WTF 1TFD < WLO 4963.50 and ideally maintain DTF 1FD on a closing basis. Downside: FEB LO 4872.50 (-2.62%) is just~~ ~~beyond~~ ~~-1σ (W) 4896 (-2.14%).~~

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