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The VIX index and VIX futures both getting pressured in a big way

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The VIX index and VIX futures both getting pressured in a big way: Sevens Report Co-Editor Tyler Richey Quoted in S&P Global

Stock market ‘fear gauge’ plunges; investors expect rally to persist into 2025

Volatility dynamics in the stock market have shifted since the election when many investors crowded into downside stock market hedges on fears that a Democratic victory could lead to taxes on unrealized capital gains, said Tyler Richey with Sevens Report Research. This also hurt the performance of short volatility strategies, which had been crushed by a massive VIX squeeze at the start of August, Richey said.

“Between the post-election unwind in broad stock market hedges and a suffering short-volatility crowd [throughout 2024], the derivatives market pendulum swung hard from one extreme to another with the VIX index and VIX futures both getting pressured in a big way over the last month,” Richey said.

Also, click here to view the full S&P Global article published on December 6th, 2024. However, to see the Sevens Report’s full comments on the current market environment sign up here.

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Market indicators and cyclical signals we monitor suggest all the pieces are in place for this bull market to end

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Bull market to end in the weeks or months ahead: Tyler Richey Quoted in Business Insider

All the pieces are in place for this bull market to end’: A technical strategist who called the S&P 500’s surge to 6,000 warns that stocks are a negative catalyst away from a 20% drop

Tyler Richey laid out an argument for why the S&P 500 could climb all the way to 6,000. Investor sentiment was bullish but not excessively so.

“Looking ahead, the collection of market indicators and cyclical signals we monitor suggest all the pieces are in place for this bull market to end in the weeks or months ahead and for a cyclical bear market to begin,” Richey said in an email, adding: “There is nothing in the current fundamental backdrop that suggests a bear market in stocks is a sure thing or even likely for that matter.”

“Weekly RSI failing to ‘confirm’ the new highs in the S&P 500 is a dynamic we have seen leading up to every major market pullback in modern market history, including the tech bubble bursting and the GFC recession,” he said in an email, referencing the 2000 and 2008 stock market crashes.

Also, click here to view the full Business Insider article published on December 7th, 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.

Market Multiple Table: December Update

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Market Multiple Table: December Update: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Market Multiple Table: A New Influence That Could Increase Volatility in 2025
  • Unbranded, Shareable MMT PDF Upon Request

Stock futures are stabilizing after Monday’s modest pullback as trader focus shifts ahead to tomorrow’s CPI report. Small caps are leading in pre-market trade thanks to a surprisingly solid NFIB report released earlier this morning.

Economically, the NFIB Small Business Optimism Index surged 8 points to 101.7 in November, handily topping estimates of 94.5 to hit the highest level since June 2021. Overseas, German CPI met estimates at 2.2% y/y, another Goldilocks inflation report.

Today, there is one economic report to watch: Productivity & Costs (E: 2.2%, 1.9%). The data has an inflation component (specifically the “Costs” part) that could move yields today and influence stocks (higher yields will weigh on equities).

Additionally, there is a 3-Yr Treasury Note auction at 1:00 p.m. ET and a few late-season earnings reports due out including AZO ($4.30), ASO ($1.25), and GME ($0.00).

The Treasury auction is another catalyst that could move yields and impact equities, but tomorrow’s CPI report is becoming the primary focus on the market as we progress through the week so market moves should be limited by trader positioning today.

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Jobs Day

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Jobs Day: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Jobs Day
  • Updated VIX Analysis

Futures are slightly lower following a mostly quiet night of news and ahead of today’s jobs report.

Economically, German Industrial Production missed expectations (-1.0% vs. (E) 1.5%) and became the latest underwhelming EU economic report.

Today focus will be on the jobs report and expectations are as follows:  200K Job-Adds, 4.2% Unemployment Rate, 3.9% y/y Wage Growth.  A “Goldilocks” job adds number is something around the 200k expectation or lower, as long as it’s not close to zero.  Anything in that range (with mostly in-line unemployment and wages) should “green light” a Fed rate cut in December and help fuel a Santa Rally.

Speaking of the Fed, there are numerous speakers today including Bowman (9:15 a.m. ET), Goolsbee (10:30 a.m. ET), Hammack (12:00 p.m. ET) and Daly (1:00 p.m. ET).  However, most of them have spoken recently and their message has been consistent:  A December rate cut is possible but not guaranteed and rates will come down over time.  As long as that’s the message from them today, they shouldn’t impact markets.

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One Last Hurdle for the Santa Rally

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One Last Hurdle for the Santa Rally: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • One Last Hurdle for the Santa Rally
  • Weekly Market Preview: Can Goldilocks Data Offset Political Volatility?
  • Weekly Economic Cheat Sheet: The Last Big Week of 2024

Futures are slightly lower on political volatility as Trump issued more tariff threats and made another unorthodox cabinet appointment while President Biden pardoned his son Hunter.

Trump threatened 100% tariffs on BRICs countries (Brazil, Russia, India, China) if they abandon the U.S. dollar. In addition, Trump made another unorthodox cabinet pick with Kash Patel as FBI Director.

Finally, President Biden reversed course and gave an unconditional pardon to his son Hunter, sparking bi-partisan criticism.

Today focus will turn from politics to actual economic data and the key report today is the ISM Manufacturing PMI (E: 47.6).  As has been the case, an in-line to slightly soft number would be the best case for stocks as it wouldn’t signal any further deterioration in the manufacturing sector and, at the same time, keep a Fed rate cut more likely than not.

We also have two Fed speakers today, Waller (3:15 p.m. ET) and Williams (4:30 p.m. ET) and any commentary that makes a December rate cut more likely will be a positive for markets.

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How Clients Should View Political Headlines

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How Clients Should View Political Headlines: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • How Clients Should View Political Headlines
  • Weekly Economic Preview: Inflation and Fed Minutes in Focus

Markets are trading with a risk-on tone to start the week with stock futures solidly higher, bond yields falling and the dollar declining as investors digest Trump’s Wall-Street-friendly pick of Scott Bessent for Treasury Secretary.

Economically, Industrial Production in Taiwan (a proxy for global semiconductor demand) slowed from 11.22% to 8.85% in October which could weigh modestly on tech stocks today while a German Business Sentiment gauge saw current and expected conditions deteriorate, rekindling worries about the EU economy.

Looking into today’s session, there is one second-tiered economic report to watch: Dallas Fed Manufacturing Survey (E: -3.9) but it should not meaningfully move markets.

There are no Fed officials scheduled to speak today however there is a 2-Yr Treasury Note auction at 1:00 p.m. ET. A good portion of today’s early rally in stocks futures can be attributed to the pullback in yields this morning, so a soft auction that sends yields back higher is the biggest risk to the early week gains today.

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Why the Gaetz Withdrawal Sparked Yesterday’s Rally

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Why the Gaetz Withdrawal Sparked Yesterday’s Rally: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Why the Gaetz Withdrawal Sparked Yesterday’s Rally
  • Examining the Strange Positive VIX and S&P 500 Correlation

Futures are modestly weaker following surprisingly disappointing economic data from Europe.

The EU November flash PMIs tumbled (48.1 vs. (E) 50.2) with all three metrics (composite, manufacturing and services) falling below 50 and signaling contraction.

Similarly, the UK November flash PMIs were also weak (49.9 vs. (E ) 51.8) signaling a sudden drop in activity.

Today focus will remain on data and the more Goldilocks the data, the better for markets.  The key reports today are the November Flash Manufacturing PMI (E: 48.8) and Flash Services PMI (E: 55.2) while we also get Consumer Sentiment (E: 73) and, within that report, the 1-Yr Inflation expectations (E: 2.6%).  Again, in-line to slightly soft data will be the best outcome for stocks, as that implies solid growth and encourages a rate cut in December.

Finally, there is one Fed speaker today, Bowman (6:15 p.m. ET), but she shouldn’t move markets.

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Who’s Right on the Consumer? WMT (Positive) or TGT (Negative)

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Why Did Stocks Drop Last Week?

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Why Did Stocks Drop Last Week?: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Why Did Stocks Drop Last Week?
  • Weekly Market Preview:  Focus on Treasury Secretary, NVDA earnings and economic growth (Thursday/Friday).
  • Weekly Economic Cheat Sheet:  Important Growth Data Late This Week

Futures are little changed following a quiet weekend of news as markets continue to digest last week’s rise in Treasury yields, and the return of political surprises (via Trump’s cabinet announcements).

There were no notable economic reports overnight.

Politically, the major remaining cabinet pick from Trump is Treasury Secretary and it should come early this week (and another unorthodox choice would further roil markets).

Today the calendar is quiet as there is just one economic report, Housing Market Index (E: 43), and one Fed speaker, Goolsbee (10:00 a.m. ET).  So, focus will be on Trump’s cabinet (again, the more traditional choice for Treasury, the better for markets) and on the 10-year yield.  If it keeps rising, that will be a continued headwind on stocks.

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Where Are We In the Bull Market Cycle? (One Year Later)

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Where Are We In the Bull Market Cycle?: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Where Are We In the Bull Market Cycle? (One Year Later)

Futures are moderately lower as markets continue to digest the market implications of the Republican win while economic data was mixed.

The U.S. Dollar at near two-year highs along with the 10-year yield pushing 4.50%, combined with Trump’s recent unorthodox cabinet picks, is causing investors to re-assess the potential impacts of the incoming Republican government.

Focus today will be on economic data and given the less dovish rhetoric from Fed officials this week, markets will want to see in-line to slightly soft reports to keep rate cuts on track.  If the data is hotter than expected, look for yields to rise and stocks to extend the early losses.  The important reports today include Retail Sales (E: 0.3%), Empire Manufacturing (0.0) and Industrial Production (E: -0.3%) and we have one notable Fed speaker, Williams (1:15 p.m. ET).

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