SPX stuck in a snooze
Before you get too excited
SPX has basically traded in the 4520/4580 range since mid November. Long gamma dealers have been "choking on theta" for the past weeks.
Source: Refinitiv
Hold your bullish horses...
Or just bears being bears....? JPM US equity strategist:
"we expect a more challenging macro backdrop for stocks next year with softening consumer trends at a time when investor positioning and sentiment have mostly reversed. Equities are now richly valued with volatility near the historical low, while geopolitical and political risks remain elevated. We expect lackluster global earnings growth with downside for equities from current levels. For S&P 500, we estimate earnings growth of 2-3% next year with EPS of $225 and Price Target of 4,200 with a downside bias."
This is new
US 10 year is down since last Friday....and the NASDAQ also down.
Source: Refinitiv
Nothing is impossible?
SPX has dislocated from US economic surprises. Surprises better start catching up, or...
Source: Refinitiv
Bulls vs bears - extreme edition
The AAII bull - bear spread has exploded to the upside. We haven't seen such a big jump in the spread in a very long time. We have reversed on much smaller moves of the spread at previous occasions...
Source: Refinitiv
Rotation into secular growth
Lower yields combined with recent dovish Fed commentary have beckoned a rotation out of YTD winners into secular growth names.
Source: GS trading desk
Bond mania
TLT 1 month rate of change needs little commenting.
Source: Refinitiv
What's the dollar trend?
Despite all the excitement, both ways, the DXY is trading without a trend, stuck in a range since last November.
Source: Refinitiv
VVIX squeezing
The VVIX squeeze we outlined last week continues. The gap vs VIX is huge. Last time the VVIX was here, VIX was at 19 ish...
Source: Refinitiv
BofA sees 3 main reasons for volatilities moving higher in 2024
1. Higher-for-longer rates & restrictive policy cause something to break before the Fed is willing to cut
2. Recession finally arrives
3. Optimistic equity volatility finally recouples higher to elevated macro uncertainty & still-stressed rates volatility
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