Market Wrap
Narratives
Markets have begrudgingly accepted that it might not be as simple as the consensus macro narrative coming into 2023 suggested it would be. Accordingly, the distribution of Fed rate-path outcomes has gone from an assumed view of ‘narrowing options’ over previous months to again now something with optionality for a higher ultimate destination and held longer. That’s ominous because the reintroduction of uncertainty around the rate path is a recipe for cross-asset vol to again percolate. We now have some tangible pockets of dealer short convexity developing (large VIX upside trades and sizable premium spent on puts in apparent recession plays) - Charlie McElligott, Nomura
Week Ahead
Next week will be critical for economic data, as market participants will be keeping an eye on the January CPI and PPI index from the Labor Department. Headline inflation is likely to have risen 0.5% month-on-month in January, the most since June 2022, yet still resulting in the annual rate slowing to 6.2% from 6.5%. Core CPI is expected to grow 0.4% over the previous month, bringing the annual rate to 5.5%.
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Earnings
Metric | UpDn | This Week | Prior Week | Baseline | Baseline TF |
---|---|---|---|---|---|
Forward 12-mo Estimate | 🔴 | 223.28 | 225.02 | 230.43 | September 30, 2022 |
Forward 12-mo PE | 🔵 | 18.5 | 18 | 15.5 | September 30, 2022 |
Nominal Earnings Yield | 🔴 | 5.4 | 5.53 | 6.43 | September 30, 2022 |
Options
Metric | UpDn | This Week | Prior Week | Net CHG | % CHG |
---|---|---|---|---|---|
Implied Volatility | 🔵 | 18.5 | 16.2 | 2.3 | 14.2% |
Call Skew | 🔴 | -4.5 | -4.1 | -0.4 | -9.76% |
GEX Flip | ⚪️ | 4,077.5 | 4,047.5 | 30 | 0.74% |
Total GEX | 🔴 | 2,702,556,941 | 16,571,518,846 | -13,868,961,905 | -83.69% |
Skew Adjusted GEX | 🔴 | 1,224,258,294 | 4,744,425,846 | -3,520,167,552 | -74.2% |
Put/Call Ratio | ⚪️ | 1.93 | 1.91 | 0.02 | 1.05% |
Futures
March E-mini S&P 500 futures settled at 4099.75 on Friday, increasing by 8.00 points. Trading activity was higher across all maturities, with 1,747,775 contracts traded in total, of which 1,744,956 were in the March maturity. Open interest decreased by 8,099 (0.39%) to 2,048,024. The March contract fell 8,701 points, or 0.43%, closing at 2,017,324.
In February, the E2B 3400 option saw the most activity with 28,074 contracts traded. The 4100 calls had the highest volume with 6,253 contracts, while the 3900 puts had 6,969 contracts. The Feb EW3 100 calls had the largest open interest at 51,119, and the Feb EW3 100 puts had 50,748.
E-mini S&P 500 implied volatility closed moderately lower, with the 30-day at-the-money shedding 0.34% to close at 18.34%. Historical volatility (30-day) also dropped, closing the session at 16.27%, a decrease of 0.57% and a twelve year low. The volatility spread (30-day, IV-HV) ended at a one month high of 2.07%, having increased by 0.23%.
Bull v Bear
This Week (30d ATM 18.34% v 15.83% p)Bulls will seek to recapture the 4100 → 4200 TR and ideally above WPOC 4124 (+0.59%) on a closing basis. Upside: Recapture DEC HI 4141.50 (+1.02%); WVAH 4165 (+1.59%); WHI 4188.25 (+2.16%); 2023 HI 4208.50 (+2.65%); 4250 Strike (+3.66%) are within +2σ (W) 4303 (+4.96%).Bears will seek to offer and build acceptance < WLO 4060.75 (Weak -0.95%) creating scope for a sweep of the January Value Area. Downside: 2022 → Present POC 4005.25 (-2.31%); 50d MA 3981 (-2.9%); OCT HI 3955.75 → 200d MA 3952.00 (-3.6%) are within -2σ (W) 3908 (-4.66%).
Last Week (4099.75 MAR23 -1.17%)Bulls will seek to recapture > FRI HI 4194 (+1.12%) and ideally establish price acceptance > 4200 (+1.26%). Upside: WHI 4208.50 (+1.46%); 22VAH 4240 (+2.22%); recapture Q421 LO 4293 (+3.5%); 4300 (+3.67%) are within +2σ (W) 4331.Bears will seek to retrace and offer back into the DEC range < 4141.50 (-0.15%) and ideally establish price acceptance below 4100 (-1.15%). Downside: GEX Flip 4079 (-1.66%); WVPOC 4053 (-2.27%); WVAL 4016 (-3.17%) are within -2σ (W) 3975.
Indicators
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