Evaluate S&P 500 Index and ETF Daily Options Data [20 Sep 2023]
Stocks closed lower on Tuesday (19 Sep 2023), while bond yield climbed to its highest levels in years. Fed two day September meeting is under way.
We have seen the lowest number of monthly housing starts since June 2020. This has raised fears that there would not be enough supply to bring down the home prices.
Canada has shown hotter-than-expected inflation, this give rise to the possibility of another rate increase later this year (maybe sometime in November 2023). Market is not expecting a rate increase in today (20 September) meeting.
S&P 500 fell by more than 0.2% with Dow and Nasdaq Composite both in the red as well. The fell was across the board. Nine of the S&P 500's 11 sectors lost ground, led lower by energy and consumer discretionary shares.
Most actively traded contract for Brent crude futures edged higher to trade at around $95 a barrel before settling a bit lower for the day.
Benchmark 10-year Treasury yield closed at 4.366%, its highest closing level since 2007. The two-year yield closed at around 5.109%, its highest level since 2006.
In this article I will be look at the S&P 500 index and ETF from the daily options given that market is expecting a rate pause, but will we see an increase in the sectors lost yesterday (19 September).
S&P 500 Index Options as of 20 September 2023
$S&P 500(.SPX)$ index options has %Puts higher than %Calls which would mean that traders are bearish of S&P 500 performance on the Fed decision day.
$Cboe Volatility Index(VIX)$ is higher on the %Calls which mean market is expecting volatility to increase as VIX is a measure of how the market volatility is behaving.
Could the impact of oil increase, bond yield increase as well as low number of housing affect S&P 500?
S&P 500 ETF Options as of 20 September 2023
Similar to what we see in index options, $SPDR S&P 500 ETF Trust(SPY)$ has higher %Puts than %Calls which indicate also a bearish sentiment.
Will we be seeing a storm coming to the market despite a high possibility of rate pause? Inflation could still remain high but Fed might pause rate to see how the progress have gone so far.
This might cause some uncertainty to the market I believe.
Summary
As Fed decision is near and market is positively looking forward to a rate hike pause, what I have observed so far does not seem to synchronize with how the market sentiment is like.
There are still concerns of inflation I believe as we can see Canada reported hotter-than-expected inflation, could we still be battling inflation while keeping rate steady for the meantime?
Would we be seeing a higher rate increase in November if inflation remain hotter?
Appreciate if you could share your thoughts in the comment section whether you think S&P 500 would make a reversal today (20 Sep) after the announcement of Fed decision?
@TigerStars @Daily_Discussion @TigerWire appreciate if you could feature this article so that fellow tiger would benefit from my investing and trading thoughts.
Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.
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Inflation was almost flat in the USA for over 100 years until the fed. That’s why $20 gold piece was $20 for decades.
When interest rates are low, the relatively superior returns in stocks become too irresistible for most investors to pass up, and this gives stocks extra price support than if fixed income is more competitive (rates are higher).
As of June 30 2023, the yield spread was inverted, and it is year 3 of the Presidential term, yet the S&P500 price resided "above" it's 10 period monthly moving average value - so the process remains in "offense" ( last "defensive" signal was June 30 2008 )
The inflation on things like phones, computers, tvs is collected to low based on faster processors or larger screens.
Negative inflation under the Gold standard where just as bad.
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