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Rising level Of Greed In The ‘Short-Volatility’ Trade

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Rising level Of Greed In The ‘Short-Volatility’ Trade: Tom Essaye Quoted in Business Insider

Stocks are vulnerable to a 5% ‘air-pocket drawdown’ as greedy traders short volatility, research firm says

“Stocks on Tuesday seemed to have an additional influence weighing on the broader market,” Tom Essaye, the founder and president of Sevens Report Research, wrote in a note on Thursday. “It turns out that it did… an overcrowded short side of the options market which was reminiscent of the 2018 ‘Volmageddon’ event.”

“Based on the magnitude of the move in VIX futures on Tuesday, there is an increasing threat that the rising level of greed in the ‘short-volatility’ trade, similar to what we saw in 2018, could result in an air-pocket drawdown of 5% or more in the S&P 500,” Essaye said.

“The rebound in interest in short-volatility strategies is once again posing a risk to the broader markets here as a negative catalyst can clearly spark a momentous, derivatives-driven selloff in the broader stock market like that which we saw in 2018,” Essaye said.

“Going forward, these expirations will remain dates to keep in mind as the threat of volatility will be elevated as we move further into 2024,” Essaye said.

Also, click here to view the full Business Insider article published on February 16th, 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 Didn’t Hot Inflation Data Cause a Bigger Drop?

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Why Didn’t Hot Inflation Data Cause a Bigger Drop? Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Why Didn’t the Hot Inflation Data Cause a Bigger Drop?
  • Economic Takeaways – Are Stagflation Risks Rising?

Stock futures are lower to start the week as a rate cut by China’s central bank failed to bolster investors’ appetite for risk overseas while domestic focus shifts to NVDA earnings.

The PBOC slashed the 5-Yr Loan Prime Rate by a record 25 bp overnight (E: -5 bp) but the rate cut failed to ease lingering concerns about the health of the property market and markets are trading with a moderate risk-off tone this morning.

Looking into today’s session, there are two economic reports to watch: Leading Economic Indicators (E: -0.1%) which has been flashing a recession signal for months, and Canadian CPI (E: 0.4%) which could further stoke inflation worries if the number comes in hot.

There are no Fed officials scheduled to speak today, however the Treasury will hold 3-Month and 6-Month Bill auctions at 11:30 a.m. ET and a 52-Week Bill action at 1:00 p.m. ET. Based on the market’s increased sensitivity to rising bond yields in recent weeks, signs of weak demand in the auction could send yields to new highs which would act as a strengthening headwind on risk assets as we start the week.

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 Reason Stocks Dropped Was Because The CPI Report

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The Reason Stocks Dropped Was Because The CPI Report: Tom Essaye Quoted in Blockworks

Bitcoin breaks $52k, outperforms stocks to new 2024 high

After markets digested the CPI print in the US, inflation data from the United Kingdom came in lower than expected, showing prices are holding steadily at 4% higher year-over-year. The more positive inflationary data helped stock futures rise ahead of Wednesday’s open, Tom Essaye, founder of Sevens Report Research said.

It’s important to realize that while the hot CPI was the catalyst for yesterday’s stock and bond market declines, stocks didn’t decline because CPI implied inflation was bouncing back,” Essaye said. “Instead, the reason stocks dropped was because the CPI report was the first data point in 2024 to not confirm these fantastically positive assumptions that have driven this rally.”

Also, click here to view the full Blockwork article published on February 14th, 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 Market Had Gotten Ahead Of Itself

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The Market Had Gotten Ahead Of Itself: Tom Essaye Quoted in Barron’s

Stocks Drop as Market Dials Back Fed Rate-Cut Expectations After CPI Data

Sevens Report Research’s Tom Essaye told Barron’s in a phone interview that while the report didn’t imply that inflation was bouncing back significantly, the market had gotten ahead of itself by pricing in inflation crashing to the Federal Reserve’s 2% target.

“I think this is more symptomatic of a market that’s frankly, gotten ahead of itself on what it expects to happen,” Essaye says. “And we’re having that expectation dialed back now.”

“It’s just one report, but I think it is a little bit of a reminder, and an important one, that what has really fueled this rally since October has been the assumption of Fed rate cuts and falling inflation,” Essaye says. “And while that likely will happen later this year, it may not happen as soon as they expected. And I think that’s what we’re seeing in markets.”

Also, click here to view the full Barron’s article published on February 13th, 2024. However, to see the Sevens Report’s full comments on the current market environment sign up here.

It’ll be Very Hard for This Market to Rally

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.

Sevens Report Research’s Tom Essaye Quoted In Barron’s

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Sevens Report Research’s Tom Essaye Quoted In Barron’s

Nasdaq Loses Steam as Stocks Give Back Some Earlier Gains

Sevens Report Research’s Tom Essaye told Barron’s that the Federal Reserve Bank of New York released median inflation expectations from its January survey that were unchanged at the one- and five-year ahead horizons. But three-year expectations fell to 2.4% from 2.6%.

“That will make the Fed more confident in cutting rates and amidst an other wise quiet day, that’s what’s driving this market,” Essaye said.

Also, click here to view the full Barron’s article published on February 13th, 2024. However, to see the Sevens Report’s full comments on the current market environment sign up here.

It’ll be Very Hard for This Market to Rally

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 Four Drivers Of This Bull Market

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The Four Drivers Of This Bull Market: Tom Essaye Quoted in SwissInfo.ch

S&P 500 Rally Hits a Wall in Run-Up to CPI Report: Markets Wrap

Last week’s news and data reinforced the four drivers of this bull market: Fed rate cuts by May, solid economic growth, continued disinflation and strong earnings, according to Tom Essaye at the Sevens Report.

“It’s important to acknowledge that this rally has been driven by actual good news and bullish expectations being reinforced by actual data,” Essaye said. “At the same time, the risks that kept investors worried in October (and even throughout 2023) haven’t been vanquished — they simply haven’t shown up yet.”

Also, click here to view the full article published on February 13th, 2024. However, to see the Sevens Report’s full comments on the current market environment sign up here.

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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.

European Shares Edged Up On Better Than Feared Retail Sales

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European Shares Edged Up: Tom Essaye Quoted in Barron’s

European Stocks Drift Higher

London’s FTSE 100 gained 0.6%, with the Paris CAC 40 up 0.3%. Frankfurt’s DAX slipped 0.1% into the red, while the pan-European Stoxx 600 rose 0.1%.

“European shares edged up on better than feared Retail Sales and a very strong German Manufacturing Orders Report,” said Tom Essaye, founder of Sevens Report Research.

Also, click here to view the full Barron’s article published on February 6th, 2023. However, to see the Sevens Report’s full comments on the current market environment sign up here.

It’ll be Very Hard for This Market to Rally

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.

Five Bullish Market Assumptions Updated

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Five Bullish Market Assumptions Updated: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Five Bullish Market Assumptions Updated (Are They Still True?)
  • Weekly Market Preview:  Important Updates on Fed Rate Cuts and Economic Growth
  • Weekly Economic Cheat Sheet:  Fed Meeting Wednesday, ISM and Jobs Report Friday

Futures are little changed following an increase in geo-political tensions over the weekend and ahead of the first really busy week of 2024.

Three U.S. soldiers were killed in an attack in Jordan by Iranian backed militants and that’s further escalating tensions in the region and oil rallied in response.

There were no economic reports overnight.

This is the first truly busy week of 2024 as we have a Fed decision on Wednesday and a jobs report on Friday and it’s the most important week of earnings season.  But, the week starts slowly as there are no economic reports today and minimal earnings.  So, focus will remain on geo-politics and 1) Any additional attacks on U.S. soldiers in the region or 2) Information about a U.S. retaliatory strike could push oil higher and weigh on stocks.

Earnings Today:  WHR ($ 3.64), SOFI (E: $0.00), CLF ($-0.07).

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 Are Chinese Stocks So Weak? (And Is There an Opportunity?)

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Why Are Chinese Stocks So Weak? Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Why Are Chinese Stocks So Weak? (And Is There an Opportunity?)
  • Chart: Leading Economic Indicators Remain Deeply Negative

U.S. futures are flat amid mixed trade overseas as European shares pulled back modestly after a weak ECB Lending Survey while Asian shares bounced solidly amid news China is planning a $278B “market rescue package” aimed at stabilizing the nation’s volatile capital market environment.

Looking into today’s session, there is one regional Fed survey release: Richmond Fed Manufacturing Index (E: -15). And while the Richmond release is less popular than other regional Fed reports, it will be more closely monitored today after both the Empire and Philly Fed surveys badly disappointed last week.

December M2 Money Supply will also be released at 1:00 p.m. ET which could move markets in early afternoon trade (especially if there is a sharp and unexpected contraction in money supply).

There are no Fed officials scheduled to speak today but there is a 2-Yr Treasury Note auction at 1:00 p.m. ET that could offer fresh insight into market expectation for Fed policy outlook. A weak auction sending yields higher, would be a negative catalyst for stocks today.

Finally earnings season is continuing to pick up with: VZ ($1.07), MMM ($2.31), GE ($0.90), PG ($1.70), JNJ ($2.27), and SYF ($0.96) reporting before the open, and NFLX ($2.20) and TXN ($1.46) releasing results after the close.

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 Did Stocks and Bonds Drop to Start 2024?

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Why Did Stocks and Bonds Drop to Start 2024? Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Why Did Stocks and Bonds Drop to Start 2024?
  • Weekly Market Preview:  Can Data Meet Market Expectations For Growth and Rate Cuts?
  • Weekly Economic Cheat Sheet:  Inflation In Focus (CPI on Thursday)

Futures are slightly lower following some disappointing EU economic data and on hawkish Fed commentary.

Economically, German Manufacturers’ Orders and Euro Zone retail sales both missed estimates, reminding investors of recession risks in Europe.

This weekend, Dallas Fed President Logan warned that financial conditions have eased materially recently and that may prevent the Fed from cutting rates anytime soon.

Today there are two notable market events including the NY Fed Inflation Expectations (E: 3.4%) and comments by Atlanta Fed President Bostic (12:00 p.m. ET).  If either event pushes back on the idea of imminent rate cuts (via inflation expectations being higher than estimates or Bostic sounding hawkish) expect more modest pressure on stocks and bonds.

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.