Week of Mar 24 2024

Market Wrap

Weekly Benchmarks - @Koyfin

Weekly Factors vs. S&P 500 - @Koyfin

Weekly Performance - @Koyfin

Narratives

Key takeaways from the Fed events in the week just passed: 1) Fed funds will next be cut – not hiked – it’s just a matter of timing; 2) Inflation is still going according to plan from the Committee’s perspective despite January and February’s prints providing the specter of stickiness; 3) Given this backdrop, 75bps of rate cuts this year is the minimum on Powell’s mind at the moment; 4) Data dependence will define near-term policy considerations but not the eventual trajectory of rates – which will be lower; 5) Investors were quick to ignore the increase in the ‘25/’26/long-run dots in favor of trading the more immediate implications of the ‘24 dot — Ian Lyngen and Vail Hartman, BMO

The Fed’s desperate to cut, the ECB and BoE need to cut, the SNB is cutting rates and the PBoC’s also cutting rates. That’s the DNA for today’s everything bull. Major central banks (except the BoJ) have laid the groundwork rate cuts during the second quarter; and this is constructive for risk assets - Bank of America

Despite deposit migration flows, a substantial segment of household money market balances are available be deployed into the equity market. We expect a net $100 billion in net equity demand from US households in 2024, not even 3% of household MMF balances, with the onset of Fed cuts likely to catalyze - Goldman Sachs

Gold funds have seen the most interest since last May. Bullion scaled new records recently, on what some say are devaluation concerns tied to developed market central banks’ apparent inclination to cut rates before inflation recedes entirely, anxious to relieve the burden of a record $82 trillion of gov debt - Bank of America

Week Ahead

In the United States, attention is centered on insights from Federal Reserve policymakers for additional clarity on the bank's future policy moves. Remarks from Chief Jerome Powell on Friday are especially anticipated. Other key data points include the PCE price indexes, personal income and outlays, and durable goods orders. Economists predict a 0.4% increase in PCE prices for February, slightly up from January's 0.3%. Core prices are expected to grow at a slower rate of 0.3%. Consumer spending and income are also expected to rise by 0.4%. Durable goods orders are predicted to rebound by 1.3% in February after the most significant drop since April 2020. The final estimate of Q4 GDP, corporate profits, and the Michigan consumer sentiment index will also be closely watched. Key regional economic indicators (the Chicago PMI, Chicago Fed National Activity Index, and Dallas Fed Manufacturing Index) and housing data (new and pending home sales, Case-Shiller home prices) will also be in focus.

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Earnings

Metric	UpDn	This Week	Prior Week	Baseline	Baseline TF
Forward 4-qtr Estimate	🔴	242.89	243.31	243.98	January 1, 2024
Forward 4-qtr PE	🔵	21.5	21	20.16	January 1, 2024
Nominal Earnings Yield	🔴	4.64	4.76	5.19	January 1, 2024

Options

Metric	UpDn	This Week	Prior Week	Net CHG	% CHG
SPX Implied Volatility	🔴	10.58	12.16	-1.58	-12.98%
SPX GEX Flip	🔵	5,177.5	5,122.5	55	1.07%
SPX Skew Adjusted GEX	🔴	-2,152,952,640	223,826,368	-2,376,779,008	-1,061.89%
Equity Put/Call Ratio	🔵	0.65	0.61	0.04	6.55%
VIX Put/Call Ratio	🔵	0.69	0.19	0.5	263.16%
SPX/W Put/Call Ratio	🔵	1.54	1.42	0.12	8.45%

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 lower in a quiet session, with the June contract off 9.25 to 5293.25. Across all maturities, volume was a light 1,164,524, with the June contract seeing 1,162,606 done. Overall open interest decreased by 8,070 (0.39%) to end the session with 2,079,249 outstanding. The June maturity decreased 0.49%, or 8,070, to finish at 2,059,679.

The March E4A 4650 put saw the most changing hands with 51,192 contracts done. In April options, the high volume call was in the 5400 strike with 2,627 changing hands, and the 4750 put leads with volume of 2,549. Option open interest is highest for the May EW3 5400 calls at 53,598, and the March E4B 4400 puts at 52,083.

E-mini S&P 500 implied volatility finished moderately down as the 30-day at-the-money fell by 0.15% to end the session at 10.53%, a one week low. Up by 0.0024% to a one week high, historical volatility (as measured by the 30-day) closed the session at 12.29%.

Higher TF (W → D) BULLISH - Higher timeframe market structure remains squarely bullish on the heels of new ATHs and a strong position of weekly close. March value will close outside and above February, with quarterly, monthly, weekly synchronized in an upward direction. That said, trend structures are reflecting mature 5th-wave legs, which increases the likelihood of an eventual correction - and the DTF once again signaled a bearish divergence for the third consecutive week. Notice that dips have been bought on retests of resilient Fair Value Gaps below; thus responsiveness will be monitored within last week’s newly formed 5244.75 → 5293.50 FVG.

Lower TF (3H → M30) NEUTRAL - Friday’s cessation of DTF 1TFU and poor low increases the odds of downside continuation on the lower timeframe. The protective higher timeframe 5244.75 → 5293.50 FVG extends just beyond Monday’s implied downside range, below which risk of reverting to a negative GEX regime emerges. Responsiveness is expected within this zone (blue highlighted, Pane 1), but buyers must recapture and hold DTF 1TFU 5311.75 (+0.35%) in order to signal completion of the pullback. Conversely, a loss of the FVG LO 5244.75 (-0.92%) creates continuation scope → 5200, which is marginally beyond -1σ (W) 5213.50 (-1.51%).

Bull v Bear

This Week (30d ATM IV 10.53% v 30d HV 12.29%)
Bulls will seek to recapture DTF 1TFU on a closing basis and ideally establish acceptance above WHI 5322.75 (+0.56%). Upside: +1σ (W) 5375.00 (+1.54%); 5461.50 PO
Bears will seek to extend DTF 1TFD and ideally offer < FVG LO 5244.75 (-0.92%). Downside: < 5200 (-1.76%) and WLO 5181.75 (-2.11%) are beyond -1σ (W) 5213.50 (-1.51%).

Last Week (5293.25 JUN24 +2.13%)
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%).~~

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