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Futures contracts tied to the index are telling a different story

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Futures contracts tied to the index are telling a different story: Tom Essaye Quoted in Market Watch

Why Wall Street’s ‘fear gauge’ could spike again around the election

But futures contracts tied to the index are telling a different story, and it’s one worth paying attention to, according to Tom Essaye, founder of Sevens Report Research.

The October VIX contract is trading at a premium to the November contract, an unusual development known to futures traders as “backwardation.” Typically, the VIX futures curve exhibits a smooth upward slope. But for most of this year, there has been a kink along this part of the curve.

According to Essaye, the inversion is notable not so much for its degree — the October contract was just 0.3 points above its September sibling as of early Thursday — but for its staying power. This segment of the curve has been in backwardation since the October contract started trading in February.

Also, click here to view the full MarketWatch article published on September 26th, 2024. However, to see the Sevens Report’s full comments on the current market environment sign up here.

If you want research that comes with no long term commitment, yet provides independent, value added, plain English analysis of complex macro topics, then begin your Sevens Report subscription today by clicking here.

To strengthen your market knowledge take a free trial of The Sevens Report.

Join hundreds of advisors from huge brokerage firms like Morgan Stanley, Merrill Lynch, Wells Fargo Advisors, Raymond James, and more! To start your quarterly subscription and see how The Sevens Report can help you grow your business, click here.

Why the Next Four Weeks Are So Important

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Investor Sentiment Update: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Why the Next Four Weeks Are So Important
  • Weekly Market Preview:  Does Data Stay Goldilocks?
  • Weekly Economic Cheat Sheet:  Jobs Report Friday, ISM PMIs This Week

Futures are slightly lower as markets digest last week’s rally ahead of a busy week of economic data.

Geo-politically, Mid-East tensions rose further as Israel struck Houthi targets in Yemen, expanding its current campaign.  However, for now this is not impacting stocks.

Economically, Chinese manufacturing and non-manufacturing PMIs underwhelmed, raising expectations for even more stimulus (and boosting Chinese stocks).

There are no important economic reports today (they come later this week) so the most important event today is Powell’s speech at 1:55 p.m. ET.  He’s unlikely to say much new (given the FOMC decision was less than two weeks ago) but a dovish reiteration of policy will likely continue to boost markets in the near term.

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Investor Sentiment Update

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Investor Sentiment Update: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Sentiment Update: Investors Aren’t Wildly Bullish, But They Are Complacent
  • August Durable Goods Come in Better-Than-Feared
  • Jobless Claims Point to Further Resilience in the Labor Market

U.S. stock futures are slightly lower this morning as more positive stimulus news out of China is being offset by a stronger yen following Japanese election results.

The PBOC cut 7-day reverse repo rates to 1.5% from 1.7% as well as lowered bank reserve ratios by another 50 bp which sent stocks in Asia solidly higher with some regional benchmarks advancing the most since 2008.

In Japan, Shigeru Ishiba’s election victory to become the nation’s next Prime Minister spurred a more than 1% rally in the yen as he is a monetary policy hawk. The yen strength is weighing on the global carry trade, specifically U.S. tech stocks in the pre-market.

Looking into today’s session, the most important potential catalysts hits before the bell with the Fed’s preferred inflation gauge, Core PCE (E: 0.2% m/m, 2.7% y/y) due out at 8:30 a.m. ET.

Additionally, the latest Consumer Sentiment Report (E: 69.0, 1-Yr Inflation Expectations: 2.7%) will be released at 10:00 a.m. ET and there is one Fed speaker in the early afternoon: Bowman (1:15 p.m.) but Fed speak has been benign this week and is likely to stay that way today.

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Is the VIX Signaling Another Volatility Spike is Coming?

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Is the VIX Signaling Another Volatility Spike is Coming?: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Is the VIX Signaling Another Volatility Spike is Coming?

Futures are sharply higher thanks to strong tech earnings, more Chinese stimulus and more global rate cuts.

Micron (MU up 15% pre-market) beat earnings and raised guidance and that’s helping futures rally this morning.

An FT article promised even more Chinese stimulus is coming and that is boosted Asian markets and U.S. futures.

Today there is potentially important economic data and the key reports are:   Jobless Claims (E: 224.5K), Durable Goods (E: 0.1%) and Final Q2 GDP (E: 3.0%).  In-line to better-than-expected readings will help further fuel this rally while weak data, especially in claims and Durable Goods, will increase hard landing fears (and weigh on stocks).

On the Fed front, there are multiple speakers today with most speaking at a Treasury Market Conference (there were so many that it’d take up the whole pre-seven look if we listed them all). The most notable is Powell (9:20 a.m. ET) but don’t expect any of the comments to move markets as the Fed told markets last week what it’s going to do and until the outlook for another 50 bps of easing changes, Fed speak shouldn’t move markets.

Join thousands of advisors from huge brokerage firms like Morgan Stanley, Merrill Lynch, Wells Fargo Advisors, Raymond James, and more! To start your quarterly subscription and see how The Sevens Report can help you grow your business, click here.

Sevens Report Co-Editor Tyler Richey Quoted in S&P Global

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Rate-cut expectations played a major role in the stock market rebound: Sevens Report Co-Editor Tyler Richey Quoted in S&P Global

Stocks surge to all-time highs; market questions if Fed cuts can sustain rally

“Rate-cut expectations played a major role in the stock market rebound off the early August pullback, but only because the increasingly dovish Fed policy expectations for sooner-and-deeper rate cuts were accompanied by encouraging economic data that helped ease the suddenly urgent fears of an imminent recession in the wake of the July jobs report,” said Tyler Richey, a co-editor with Sevens Report Research.

Rate cut expectations will weigh heavily on the stock market through the end of 2024, primarily as they relate to the outlook for economic growth, said Richey with Sevens Report Research.

“Soft landings are historically elusive, and the Fed has notably never pulled one off after a deep and prolonged yield curve inversion like we have seen in the Treasury market since the summer of 2022,” he said. “Using history as a guide, we are in a late cycle environment and very likely closer to seeing a lasting market top established than a new leg higher in a sustainable bull market.”

Also, click here to view the full S&P Global article published on September 20th, 2024. However, to see the Sevens Report’s full comments on the current market environment sign up here.

If you want research that comes with no long term commitment, yet provides independent, value added, plain English analysis of complex macro topics, then begin your Sevens Report subscription today by clicking here.

To strengthen your market knowledge take a free trial of The Sevens Report.

Join hundreds of advisors from huge brokerage firms like Morgan Stanley, Merrill Lynch, Wells Fargo Advisors, Raymond James, and more! To start your quarterly subscription and see how The Sevens Report can help you grow your business, click here.

Tyler Richey of the Sevens Report highlights a market breadth concern

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Tyler Richey of the Sevens Report highlights a market breadth concern and is quoted in MarketWatch

A technical concern suggests upside momentum is fading

Tyler Richey of the Sevens Report highlights a market breadth concern: there are more stocks trading below their 200-day average than their 50-day average.

“In simple terms, a situation where there are more stocks below their 200-day MA than their 50-day is a bearish one as in a healthy market environment, there should consistently be more stocks above their 200-day MAs than 50-day MAs,” Richey says. Another concern is the NYSE advance-decline line declined last week even though the S&P 500 hit record highs.

Also, click here to view the full MarketWatch article published on September 24th, 2024. However, to see the Sevens Report’s full comments on the current market environment sign up here.

If you want research that comes with no long term commitment, yet provides independent, value added, plain English analysis of complex macro topics, then begin your Sevens Report subscription today by clicking here.

To strengthen your market knowledge take a free trial of The Sevens Report.

Join hundreds of advisors from huge brokerage firms like Morgan Stanley, Merrill Lynch, Wells Fargo Advisors, Raymond James, and more! To start your quarterly subscription and see how The Sevens Report can help you grow your business, click here.

The threat of significant earnings reports or major economic releases

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The threat of significant earnings reports or major economic releases: Sevens Report Analysts Quoted in Investing.com

What the Fed decision means for markets, beyond the near term

Without the threat of significant earnings reports or major economic releases, investors appear to be operating in an environment that is “1) easing Fed, 2) slowing but ‘OK’ economic data, and 3) generally solid earnings,” Sevens Report said in a recent note.

According to the Sevens Report, if the rate cuts are timely, they could lead to falling yields, strong earnings growth, and positive economic tailwinds. This would likely result in continued upward momentum for stocks, with the potential for the S&P 500 to hit 6,000.

“I say that confidently because the Fed cutting in time would create this macroeconomic outcome: 1) Falling yields, 2) Continued very strong earnings growth, 3) Positive economic tailwinds, 4) The prominent existence of the Fed put and 5) Expectations of accelerating growth in the future,” President of Sevens Report wrote in the note.

Also, click here to view the full Investing.com article published on September 20th, 2024. However, to see the Sevens Report’s full comments on the current market environment sign up here.

Lastly, If you want research that comes with no long term commitment, yet provides independent, value added, plain English analysis of complex macro topics, then begin your Sevens Report subscription today by clicking here.

To strengthen your market knowledge take a free trial of The Sevens Report.

Join hundreds of advisors from huge brokerage firms like Morgan Stanley, Merrill Lynch, Wells Fargo Advisors, Raymond James, and more! To start your quarterly subscription and see how The Sevens Report can help you grow your business, click here.

0DTE Options Primer (3 ETF Plays)

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0DTE Options Primer (3 ETF Plays): Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • A Primer (and Potential Plays) on 0DTE Options
  • September Flash PMI Takeaways
  • Chart: The Rally in the “Rest of the Market” Is Losing Momentum

U.S. stock futures are tracking most global equity markets higher after the People’s Bank of China announced new stimulus measures to support economic growth overnight.

The PBOC cut a key policy interest rate, reduced bank reserve requirements, and injected more than $100B into the financial system sending Chinese stocks higher by 4%+.

Today, there are three economic reports to watch: Case-Shiller Home Price Index (E: 5.9%), FHFA House Price Index m/m (E: -0.1%), and Consumer Confidence (E: 103.0). After last week’s 50 bp rate cut from the Fed, investors are looking for stable and solid economic data so the risk to markets is underwhelming data this morning.

There is one Fed speaker today: Bowman at 9:00 a.m. ET and investors are increasingly hopeful the FOMC will cut rates by 50 bp again in November in order to pull off a soft landing so any pushback on that idea from Bowman could weigh on risk assets.

Finally, there is a 2-Yr Treasury Note auction at 1:00 p.m. ET. Strong demand (lower yields) will be supportive of a continued rally in stocks while a weak auction (higher yields) could also weigh on equity markets this afternoon.

Join thousands of advisors from huge brokerage firms like Morgan Stanley, Merrill Lynch, Wells Fargo Advisors, Raymond James, and more! To start your quarterly subscription and see how The Sevens Report can help you grow your business, click here.

Hard Landing/Soft Landing Scoreboard (Updated)

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Hard Landing/Soft Landing Scoreboard (Updated): Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Hard Landing/Soft Landing Scoreboard (Updated)
  • Post Fed Technical Takeaways

Futures are modestly lower on disappointing earnings results and as markets digest Thursday’s big rally.

Fed Ex (FDX) missed earnings, cut guidance and voiced concern about economic growth and that negative print is contributing to the decline in futures.

The Bank of Japan kept rates unchanged (as expected) and didn’t provide a hawkish surprise, although the BOJ is expected to hike rates again between now and year-end.

Today there are no notable economic reports and just one Fed speaker (Harker (2:00 p.m. ET)) and given that lack of catalysts we’d expect some continued digestion of Thursday’s big rally.

Join thousands of advisors from huge brokerage firms like Morgan Stanley, Merrill Lynch, Wells Fargo Advisors, Raymond James, and more! To start your quarterly subscription and see how The Sevens Report can help you grow your business, click here.

Markets are currently facing “tectonic risks”

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Markets are currently facing “tectonic risks”: Sevens Report Analysts Quoted in Investing.com

Markets are currently facing ‘tectonic risks’, strategists warn

The latest Sevens Report issued a warning, stating that markets are currently facing “tectonic risks” that could pose significant threats over time.

Sevens acknowledged a sense of disbelief among some investors who were surprised by the resilience of stocks, despite mounting political uncertainty and a clearly slowing economy.

According to Sevens, while there are visible warning signs—including rising unemployment, weak manufacturing data, and negative bank guidance—the overall news isn’t “bad enough yet to cause a sustainable decline in stocks.”

However, they pointed out that the macro risks are real, with political uncertainty (particularly around potential elections), economic ambiguity (whether there will be a soft or hard landing), and geopolitical tensions (including Russia/Ukraine and the situation in Taiwan) looming large.

However, “potential risks and anecdotal negatives, while all legitimate, and not yet enough to distract investors from positive factors in this market,” they wrote.

They believe factors such as the anticipation of Federal Reserve rate cuts, expected earnings growth, and sustained enthusiasm around artificial intelligence have been supporting the market.

The analysts stated that “the burden of proof remains with the bears” as these positive elements keep stocks buoyant for now.

However, the report emphasized that while markets could “grind higher” in the short term, with the potential for the S&P 500 to hit new highs, they remain exposed to “dramatic negative shocks” that could result in a significant 10%-20% decline.

“Bottom line, the risks currently facing this market (economic growth, earnings, geopolitics) are tectonic risks. They don’t present themselves all at once or in a flash, they evolve over time until they become sustainable and that’s when bear markets occur,” said Sevens.

Also, click here to view the full Investing.com article published on September 16th, 2024. However, to see the Sevens Report’s full comments on the current market environment sign up here.

Lastly, If you want research that comes with no long term commitment, yet provides independent, value added, plain English analysis of complex macro topics, then begin your Sevens Report subscription today by clicking here.

To strengthen your market knowledge take a free trial of The Sevens Report.

Join hundreds of advisors from huge brokerage firms like Morgan Stanley, Merrill Lynch, Wells Fargo Advisors, Raymond James, and more! To start your quarterly subscription and see how The Sevens Report can help you grow your business, click here.