Market Wrap
Sentiment
The bull case is supported by firm economic data, earnings momentum, eventual Fed rate cuts, and AI-driven productivity gains. The bear case points to the tight rope between disinflation and growth, hawkish Fed repricing, rich valuations, and a struggling lower-income consumer. The base case sees growth moderating to a slower but healthy pace, gradual disinflation enabling late 2024 rate cuts, and a continued rally with some consolidation.
Left tail risks include persistent inflation forcing prolonged high rates and a hard landing, defensive sector rotation, deteriorating breadth and technicals, elevated complacency and leverage, and geopolitical uncertainties. Right tail opportunities arise from faster disinflation allowing earlier aggressive Fed cuts, an AI-driven productivity and capex boom, and a "great rotation" into equity income and value.
Key technical levels to watch are 5,342 (resistance), 5,180 (50-day MA support), 5,075 (trading risk), 4,953 (April low), and 4,821 (40-week MA). Indicators like the percentage of NYSE stocks above 200-day MA, VIX spikes, and weekly MACD are important to monitor. Seasonally, June-August offers tailwinds for a summer rally — Claude 3 Opus (Sources: Yardeni Research, Bank of America, Goldman Sachs, LSEG, Nomura, Oppenheimer)
Week Ahead
Current forecasts suggest that the annual inflation rate will maintain a steady level at 3.4%. However, the core rate, which excludes volatile food and energy prices, may experience a slight decrease to 3.5%, reaching a fresh three-year low. On a month-over-month comparison, the headline CPI is predicted to rise at a slower pace of 0.2%, while the core CPI is expected to remain stable at 0.3%.
The Federal Reserve is likely to keep the fed funds target range constant at 5.25%-5.5%. Market participants will be keen to discern any hints regarding the timing of a prospective rate cut and the anticipated number of reductions for the current year. New economic projections released by the Fed will also be under scrutiny.
In addition to the CPI report and Fed's decision, several other key data points warrant attention throughout the week. These include the Producer Price Index (PPI), export and import prices, and the preliminary reading of the Michigan consumer sentiment index - Source: TradingEconomics
Earnings
Metric | UpDn | This Week | Prior Week | Baseline | Baseline TF |
---|---|---|---|---|---|
Forward 4-qtr Estimate | 🔵 | 253.27 | 252.89 | 243.98 | January 1, 2024 |
Forward 4-qtr PE | 🔵 | 21.1 | 20.7 | 20.16 | January 1, 2024 |
Nominal Earnings Yield | 🔴 | 4.73 | 4.83 | 5.19 | January 1, 2024 |
Options
Metric | UpDn | This Week | Prior Week | Net CHG | % CHG |
---|---|---|---|---|---|
SPX Implied Volatility | 🔴 | 10.28 | 10.67 | -0.39 | -3.66% |
SPX GEX Flip | 🔵 | 5,307.5 | 5,287.5 | 20 | 0.38% |
SPX Skew Adjusted GEX | 🔴 | -1,826,856,231 | -470,828,164 | -1,356,028,067 | -288.01% |
Equity Put/Call Ratio | ⚪️ | 0.73 | 0.73 | 0 | 0% |
VIX Put/Call Ratio | ⚪️ | 0.56 | 0.56 | 0 | 0% |
SPX/W Put/Call Ratio | ⚪️ | 1.24 | 1.24 | 0 | 0% |
Futures
Bull v Bear
This Week: 30d ATM IV 10.16% v 30d HV 9.84% +0.32%Bulls will seek to establish price acceptance at or above ATH 5385.50 on a closing basis. Upside: 5400 (+0.83%) is within +1σ (W) 5433 (+1.44%).Bears will seek to quickly cause cessation of DTF 1TFU on a closing basis. Downside: 5300 and WVAL (-1.08%) is within -1σ (W) 5280.00 (-1.41%).
Last Week: 5355.75 JUN24 +1.14%Bulls will seek to hold 5272.25 and ideally breakout > 5349.00 on a closing basis. Upside: Weak ATH 5368.25 (+1.37%) is just within +1σ (W) 5377 (+1.54%).Bears will seek to offer below 5256.25 (-0.74%) on a closing basis. Downside: 50d MA and WLO 5205.50 (-1.70%) is justbeyond-1σ (W) 5217.00 (-1.48%).