Week of Apr 14 2024

Market Wrap

Weekly Benchmarks - @Koyfin

Weekly Factors vs. S&P 500 - @Koyfin

Weekly Performance - @Koyfin

Narratives

Between this and last week’s payrolls upside, you can forget about a June rate cut from the Fed. It’s off the table. It has now become very difficult to envision 75bps of rate cuts this year in the wake of Wednesday’s data. Overall, the CPI figures materially undermine the Fed’s assumption that January/February were simply a bump in the road toward normalization — Ian Lyngen, BMO

Market breadth as measured the 10d MA of new 52-week highs minus new 52-week lows confirmed the rally into late 2023 and early 2024 but has since developed a tactical bearish divergence as new highs have waned relative to new lows. This March-April divergence for the SPX and a YTD divergence on the NASDAQ Comp and NYSE Comp suggest tactical risk for equities - Bank of America

ABB (Anything But Bonds) Bull inciting greed for inflation hedges and monopolistic cash flows (new highs gold & Magnificent 7) plus fear of leverage (see REITs, KRE, RTY) & duration (XBI). The no landing probability is rising…rare for tech & commodities both top-of-the-price but consistent with no landing and very reminiscent of 1999 - Bank of America

While we continue to expect the Fed to cut on quarterly basis once it starts, we think the right answer is to reduce the number of cuts, whether it is due to: the increase in the labor force pushing potential growth temporarily higher, higher inflation leading the Fed to keep policy more restrictive on the margin, or large fiscal deficits helping fuel the expansion - Bank of America

Week Ahead

In the United States, retail sales data and speeches from several Federal Reserve policymakers will be closely watched by investors. Additionally, the first quarter earnings season will proceed into its second week. Major financial companies set to report include Goldman Sachs, Bank of America, Morgan Stanley, American Express, Blackstone, and Charles Schwab. Other notable companies releasing earnings include UnitedHealth, Taiwan Semiconductor Manufacturing, Netflix, P&G, J&J, ASML Holding, Abbott, ProLogis, Intuitive Surgical, and Elevance Health. March's retail sales are projected to have grown by 0.3%, following a 0.6% increase in February. The housing sector will also be under scrutiny, with a focus on building permits, housing starts, existing home sales, and the NAHB Housing Market Index. Other data to monitor include industrial production, business inventories, overall capital flows, the NY Empire State Manufacturing Index, and the Philadelphia Fed Manufacturing Index. (Source: Trading Economics)

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Earnings

Metric	UpDn	This Week	Prior Week	Baseline	Baseline TF
Forward 4-qtr Estimate	🔵	251.81	251.58	243.98	January 1, 2024
Forward 4-qtr PE	🔴	20.3	20.6	20.16	January 1, 2024
Nominal Earnings Yield	🔵	4.91	4.84	5.19	January 1, 2024

Options

Metric	UpDn	This Week	Prior Week	Net CHG	% CHG
SPX Implied Volatility	🔵	14.52	13.36	1.16	8.68%
SPX GEX Flip	🔴	5,123.41	5,207.5	-84.09	-1.61%
SPX Skew Adjusted GEX	🔴	-4,892,426,884	-407,214,929	-4,485,211,955	-1,101.44%
Equity Put/Call Ratio	🔴	0.68	0.71	-0.03	-4.23%
VIX Put/Call Ratio	🔴	0.42	1.13	-0.71	-62.83%
SPX/W Put/Call Ratio	🔴	1.44	1.66	-0.22	-13.25%

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 finished the session at a one month low of 5167.50 Friday, losing 75.75 (1.44%). Total volume was a heavy 2,008,499, with the June maturity seeing 2,005,106 traded. Across all maturities, open interest added 13,338, or 0.64%, with June up 12,828 (0.62%) to 2,072,666.

Option volumes were largest for the April E3A 5350 call (11,453) and the April E3A 4300 put (38,668). Greatest volumes in April option trading were seen in the 5250 calls (6,630) and the 5000 puts (12,587). Option open interest is highest for the May EW3 5400 calls at 53,340, and the April E3A 4300 puts at 84,338.

As measured by the 30-day at-the-money, implied volatility finished the day sharply up, gaining 1.53% to close the session at a one month high of 14.44%. The 30-day historical volatility ended the session gaining 0.62% to a one week high of 11.10%. As measured by the 30-day, the 25-delta Risk Reversal finished the session sharply down, lower by 0.83% to end the day at a one month low of -3.70%.

Higher TF (W → D) NEUTRAL - The lower timeframe correction has done its job; it has facilitated higher timeframe trend pause, sufficient for an arguably overdue retest of ascending 50d MA. The now confirmed breakout failure (above the March VA) and shift in momentum has created scope for a sweepback of the value area → targeting VAL 5095 (-1.4%), the coming week’s bearish scenario. Conversely, responsiveness at the now convergent 50d MA would be indicative of completing the correction if follow through is sufficient to recapture Thursday’s local high 5257.50 → 5266 FVG (+1.91%) on a closing basis.

Lower TF (3H → M30) BEARISH - The lower timeframe correction expanded its range, as sellers grabbed liquidity just above the 5250 midpoint of the 5308 → 5191.50 swing structure (Pane 1), and gathered momentum sufficient to confirm a Break of Structure (< 5173.50 on a closing basis. The resulting 5257.50 → 5150 leg will serve as the coming week’s reference range. Holding Friday’s closing bullish FVG at 5160.25 creates scope for rotating → 5200 (+0.63%) where sellers would be expected to respond. Acceptance > 5200 on confirming momentum opens the gate to retest Thursday’s local high 5257.50 and positive GEX flip point (+1.73%).

Bull v Bear

This Week (30d ATM IV 14.44% v 30d HV 11.01%)
Bulls will seek to recapture Thursday’s local high 5257.50 and positive GEX on a closing basis. Upside: WHI 5285 (+2.27%) is beyond +1σ (W) 5274 (+2.06%).
Bears will seek to extend the correction < WLO 5150 and 50d MA on a closing basis. Downside: MAR VAL 5095.25 (-1.4%) is within -1σ (W) 5061.00 (-2.06%).

Last Week (5167.50 JUN24 -1.63%)
~~Bulls will seek to recapture DTF 1TFU and ideally the 5308.50 HH on a closing basis. Upside: WHI & ATH 5333.50 (+1.53%) is within +1σ (W) 5353.00 (+1.90%).~~
Bears will seek to expand the negative GEX < 5257 and ideally extend DTF 1TFD on a closing basis. Downside: < Poor WLO 5191.50 (-1.17%) is within -1σ (W) 5156.00 (-1.85%).

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