Week of Feb 09 2025

Market Wrap

Weekly Benchmarks - @Koyfin

Weekly Factors vs. S&P 500 - @Koyfin

Weekly Performance - @Koyfin

Outlook

A capital war masquerading as Trade War 2.0 lies at the heart of current market dynamics, as evidenced by foreign central banks' significant $100bn post-election Treasury selling—a volume matching the entire FY24 net issuance. This shift in foreign positions coincides with mixed labor market signals: January's NFP showed a headline miss at 143k (vs 175k expected), despite substantial upward revisions to November and December (+568k combined). While the annual benchmark revisions revealed a weaker 2024 overall, with total hiring down to 1.996 million from 2.232 million, wage growth persists at a concerning 0.5% MoM. Markets are now shifting focus from headline risks to deeper structural challenges within the dollar system. Michael Hartnett highlights a potential "government recession" orchestrated by Trump and Musk, targeting public sector savings that could affect growth and employment. These combined forces—trade uncertainty, labor market shifts, capital flow disruption, and changing government spending patterns—call for tactical flexibility and close monitoring of systematic triggers and foreign holdings data. The technical setup shows increasing vulnerability. Critical SPX levels are 5996 (short-term), 5828 (medium-term), and 5353 (long-term). The gamma profile has weakened from +$12bn to +$5.9bn (47th percentile), showing an unusual downward slope that indicates less support during rallies. Though systematic strategies currently show bullish positioning—CTAs (+0.6%), Risk Parity (+0.8%), and Vol Control (+1.1%)—this could quickly reverse given high correlation risks and upcoming catalysts. The main downside risk lies in an escalation from trade to capital war, with foreign central banks wielding $3.5tn in Treasuries as leverage. This risk is heightened by ongoing wage pressures and the Fed's likely need to maintain elevated rates. The upside scenario depends on Trump showing policy flexibility, potentially resolving trade and immigration issues quickly, backed by strong corporate buybacks (60% of S&P 500 companies opening windows February 7) and systematic buying support. Week 7 brings crucial events: US CPI on Wednesday, Powell's Congressional testimony Tuesday/Wednesday, and US retail sales Friday. These events unfold as global equity markets rotate, with European indices reaching new highs while US growth stocks underperform. Though ISM manufacturing recovery signals and strong earnings results (76.3% beats with 6.4% aggregate surprise) point to economic resilience, rising inflation expectations and weakening consumer sentiment create offsetting pressures.

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Calendar (UTC-5)

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Macro Dashboard

Forward Earnings

Metric	UpDn	This Week	Prior Week	Baseline	Baseline TF
Forward 4-qtr Estimate	🔴	271.24	272.77	263.39	January 1, 2025
Forward 4-qtr PE	🔵	22.4	22.3	22.7	January 1, 2025
Nominal Earnings Yield	🔴	4.46	4.48	4.41	January 1, 2025

Volatility & Correlations

Metric	UpDn	This Week	Prior Week	Net CHG	% CHG
VIX3M - VIX1M 10d Z	🔵	0.72	-0.2	0.92	460%
COR1M	🔵	11.14	8.42	2.72	32.3%
COR3M	🔵	13.48	12.51	0.97	7.75%
Equity Put/Call Ratio	🔵	0.52	0.49	0.03	6.12%
SPX/SPXW Put/Call Ratio	🔴	1.25	1.28	-0.03	-2.34%
VIX Put/Call Ratio	🔴	0.34	0.75	-0.41	-54.67%
OEX Put/Call Ratio	🔴	3	4	-1	0.25%

Cross-Asset Volatility — CBOE

Cross-Asset Correlation — CBOE

S&P 500 Futures

Higher TF (W → D) NEUTRAL - Since the November election, higher timeframe price action has formed a broad trading range between 5797.75 → 6184.50 (R 386.75 6.25%), reflecting market uncertainty. Trading ranges also increase the likelihood of breakout failures—and failures have preceded every major reversal this year. Notice that the current range has also evolved through alternating bull and bear channels, with extended trend lines serving as recent turning points (shown in chart 2 above). While trading ranges typically resolve in the direction of the primary trend, the odds shift to 50/50 the longer a formation continues.

Lower TF (3H → M30) BEARISH - The past two weeks have featured a headline-driven selloff and deep gap down on Sunday, followed by a breakout failure on Monday, leading to a reversal through Friday before collapsing into the close. Yet price action remains remarkably technical, despite recent volatility, demonstrated by basic—and highly tradable—spike and channel trend structures. Markets tend to rinse and repeat, and Friday's Outside Reversal Day combined with the weak closing position suggests downside continuation and retest of last week's bull channel base, coinciding with the frequently visited October High of 6000.75.

ATM IV30 12.73% v HV 13.27% IV-HV -0.54%
Bulls will seek to breakout above Friday’s pullback high of 6078.50 on a closing basis. Upside: WHI 6123.25 and YTD High 6162.25 are within +1σ (W) 6169 (+1.98%).
Bears will seek to breakout below 6046.50 and offer < MM 6014.50 on a closing basis. Downside: WLO and extending 1TFD is coincidental with -1σ (W) 5935 (-1.89%).

Last Week: 6049.50 MAR25 -0.28%
B~~ulls will seek to hold the 6056.50 → 6146.75 TR and ideally reverse and breakout to the upside. Upside: WHI 6146.75, YTD High 6162.25, and ATH 6184.50 are withi~~n ~~+1σ (W) 6186 (+1.96%)~~.
Bears will seek to form a second-leg down by offering below 6056.50 on a closing basis. Downside: 6000 (-1.11%) and MM 5965.25 target are within -1σ (W) 5953 (-1.88%).

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