Market Wrap
Narratives
Volatility levels tend to follow the levels of interest rates with a lag, since monetary policy impacts leverage, liquidity provision and the functioning of arbitrage channels in financial markets, in addition to its impact on economic growth/corporate margins/credit conditions/etc. With short-term rates at 15-year highs and implied volatility well below its long-term average, volatility levels appear disconnected from interest rates — Marko Kolanovic
Week Ahead
The upcoming week will be focused on the FOMC meeting and Fed Chair Jerome Powell's press conference. Powell is expected to indicate that the Fed is done raising the federal funds rate and acknowledge progress in bringing down inflation. The markets have likely already priced in Powell's remarks and the Summary of Economic Projections. Other key data to watch include consumers' inflationary expectations, CPI, PPI, retail sales, and industrial production, which are expected to confirm a moderating inflation trend and support a bullish outlook for stocks and bonds - Yardeni Research
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Earnings
Metric | UpDn | This Week | Prior Week | Baseline | Baseline TF |
---|---|---|---|---|---|
Forward 4-qtr Estimate | 🔴 | 236.26 | 236.41 | 228.39 | January 1, 2023 |
Forward 4-qtr PE | 🔵 | 19.5 | 19 | 17.2 | January 1, 2023 |
Nominal Earnings Yield | 🔴 | 5.13 | 5.15 | 5.86 | January 1, 2023 |
Options
Metric | UpDn | This Week | Prior Week | Net CHG | % CHG |
---|---|---|---|---|---|
SPX Implied Volatility | 🔵 | 11.01 | 10.6 | 0.41 | 0.42% |
SPX GEX Flip | 🔵 | 4,557.5 | 4,512.5 | 45 | 1% |
SPX Skew Adjusted GEX | 🔴 | -3,840,835,577 | -3,137,760,275 | -703,075,302 | -22.41% |
Equity Put/Call Ratio (CBOE) | 🔵 | 0.56 | 0.51 | 0.05 | 9.8% |
VIX Put/Call Ratio (CBOE) | 🔵 | 0.61 | 0.3 | 0.31 | 103.34% |
SPX/W Put/Call Ratio (CBOE) | 🔵 | 1.25 | 1.2 | 0.05 | 4.17% |
Futures
Dec E-mini S&P 500 futures ended at a one month high of 4607.50 Friday, higher by 18.00. Across all maturities, volume came in at a one month high of 3,621,725, with Dec seeing a heavy 2,289,425 traded. Total open interest ended at a one month high of 2,452,283, adding 54,793, or 2.29%. Dec open interest shed 405,569 (19.33%), to 1,692,975.
The Dec E2C 3825 put saw the most action with 49,623 contracts done. High volumes in Dec option trading were seen in the 4650 calls (5,255) and the 4600 puts (13,362). Calls with the highest open interest are the Dec 4600 strike (82,343), and for the puts are the Dec EW3 3300 strike (69,389).
Implied Volatility ended the day moderately down with the 30-day at-the-money lower by 0.72%, to close the session at a one week low of 10.42%. Down by 0.29% to a one month low, historical volatility (as measured by the 30-day) ended the day at 10.81%.
Bull v Bear
This Week (30d ATM IV 10.42% v 30d RVOL 10.81%)Bulls will seek to extend upside and price acceptance > WHI on a closing basis. Upside: Q323 HI 4734.50 is just beyond +1σ (W) 4728.50 (+1.46%). ESH24 Q222 LH 4860.25 is beyond +2σ (W) 4797 (+2.93%).Bears will seek to cause cessation of WTF 1TFU and ideally recapture negative GEX < 4598.50 and within -1σ (W) 4538 (-1.42%). Downside Vol Trigger 4550 (-2.37%) is within -2σ (W) 4528 (-2.84%).
Last Week (4607.50 DEC23 +0.14%)Bulls will seek to extend upside and price acceptance > WHI on a closing basis. Upside: Q323 HI 4634.50 (0.73%) is within +1σ (W) 4670 (+1.51%). ATH 4808.25 (+4.51%) > +2σ (W) 4731 (+3.00%).Bears will seek to cause cessation of DTF 1TFU and a pullback phase. Downside: WVAL 4543 (-1.07%); WLO 4536.75 (-1.22%) are within -1σ (W) 4534 (-1.45%). GEX Flip 4520.50 (-1.74%) is just beyond.
Indicators
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