Earnings speculation is nearing the end, and the upward pace of the market may slow down

First, weekly market review

1. Weekly performance of major US stock index futures varieties

The important financial reports of the third quarter were disclosed one by one, most of which exceeded market expectations, driving the market wind to rebound, superimposed some economic data showed that the improvement of the US service industry remained strong, Powell said that interest rates would not be raised during the year, and the three major indexes continued to oscillate upwards. Specifically, on October 19, boosted by the strong three quarterly reports, the three major U.S. stock indexes rose collectively, and the S&P 500 index recorded 5 consecutive yangs; on October 20, the Federal Reserve's Beige Book showed that prices rose significantly in most regions, and labor shortages still existed. Although the pressure of inflation and the new crown epidemic still exists, due to Tesla and other third-quarter earnings reports exceeding market expectations, the market risk appetite has improved, and the three major indexes have continued to run strongly; on October 21, with the landing of staged disturbance factors, driven by strong earnings reports and year-end optimism, the S&P 500 index hit a record high, and the general strengthening of large technology stocks also helped boost the market. The Fear Index VIX once touched the lowest point since the beginning of July, indicating that investors do not believe that the stock market will not fall sharply or rise in the future; on October 22, Powell again talked about inflationary pressures, the market expected the probability of interest rate hikes next year, superimposed next week is about to usher in the release of the earnings report of technology stocks, the market risk appetite has cooled, the decline in technology stocks has led to the adjustment of the Nasdaq, the Dow has continued to rise; on October 25, data show that 84% of the 117 companies that have announced earnings reports so far in the S&P 500 index have reported earnings so far. The company's reported profits exceeded expectations. The market expects the S&P 500 company's profit to grow by about 35% in the third quarter. U.S. stocks remained strong, with the three major stock indexes closing higher across the board. The Nasdaq led the gains, with the S&P 500 and Dow Jones closing at record highs.

Table 1: Current contract weekly performance

Source: Wind International Derivatives Think Tank

2. Weekly data of S&P 500 Industry Index

October 19, US time- October 25, the week, the third quarter of the financial report mostly exceeded expectations, superimposed market risk factor interference weakened, market sentiment rebounded, the three major indexes continued to rise, the S&P 500 industry sector only the communication services sector fell, the rest of the sector closed up across the board, of which medical and health, real estate, optional consumption, financial sector rose in the front.

Table 2: Weekly rise and fall of the S&P 500 Industry Index

3. Weekly performance of MSCI core regional index

In the week from October 19 to October 25, US time, with the short-term release of market risk factors and the repair of market sentiment, the speculation of the three quarterly reports in the United States drove the market wind bias, and the MSCI index closed up across the board, of which the Asia-Pacific region (except Japan), Asia (Japan), and the global increase were in the forefront.

Table 3: The MSCI Core Regional Index rose or fell during the week

2. Fundamental analysis

(1) In the United States, Markit's manufacturing PMI fell back and fell short of market expectations in October, and the service industry PMI continued to improve, hitting the highest in July. October 22 released data show that the United States October Markit manufacturing PMI preliminary value recorded 59.2, the previous value of 60.7, expected 60.3, the United States October Markit service industry PMI preliminary value recorded 58.2, the previous value of 54.9, expected 55.1, the United States in October Markit manufacturing PMI fell, less than the market expectations, the service industry PMI continued to improve. With the advancement of vaccination and the gradual prevention and control of the epidemic, the US economy has gradually transitioned to an improvement in the service industry, and the recovery of the service industry in October marked a strong start to the fourth quarter of the economy. As enterprises expand production capacity to meet growing demand, employment demand has rebounded, but due to supply chain bottlenecks and labor shortages, enterprise production has been restricted, superimposed high raw material costs have led to an increase in factory prices, price costs have gradually been transmitted to the service industry, increasing inflationary pressure, it is expected that the ISM manufacturing PMI in October or month-on-month decline, the service industry continues to improve.

Figure 1: Markit Manufacturing and Services PMI in the United States in October

(2) U.S. real estate investment in September fell short of market expectations. The data released on October 19 showed that the total number of new housing starts in the United States in September was 1.555 million units annualized, the previous value was 1.58 million, and the expected 1.62 million households, the total number of construction permits in the United States in September recorded 1.589 million, the previous value was 1.721 million, and it is expected to be 1.68 million. In the early stage of the epidemic, with the global opening of quantitative easing policies, low interest rate costs to support the growth of real estate demand, real estate investment began to take the lead in recovery, but with rising inflationary pressures, raw material costs, and unpredictable supply chain delays and labor shortages, it was difficult for builders to meet the still strong housing demand in recent months, and real estate starts and construction permits fell significantly, indicating a slowdown in real estate investment.

Figure 2: U.S. real estate investment in September

(3) The number of initial jobless claims in the United States during the week was better than market expectations. October 21 released data show that the United States to October 16 the week of the week of the initial jobless claims recorded 290,000 people, the previous value of 296,000 people, expected 300,000 people, the United States that week's initial jobless claims performed better than the market expected, the job market continued to improve, although the current employment is still a distance from the pre-epidemic level, but due to the gradual control of the epidemic, vaccination gradually achieve universal immunization, service demand gradually improved, superimposed future policy plans to shrink, subsidies gradually withdrawn from the market, The willingness to work may gradually increase, and the US job market may gradually improve.

Figure 3: Initial jobless claims in the United States during the week

The U.S. October Markit manufacturing and service industry PMI index, real estate investment, retail sales, personal consumption expenditure and other data show that the U.S. service industry continued to improve, but due to inflation pressures and labor shortages, manufacturing production fell, and U.S. inflation gradually transmitted downwards, the Fed policy reduction is expected to gradually heat up, the Fed's latest monetary policy meeting minutes show that the earliest will begin to reduce the scale of bond purchases in November this year, policy reduction uncertainty factors landed, Follow-up continued to focus on the job market and the functioning of the economy, as well as discussions on interest rate hikes.

3. Position analysis

According to data released by the Commodity Futures Trading Commission (CFTC), as of the week ended October 19, speculative positions in E-Mini S&P 500 stock index futures and options decreased from 39816 lots to 14979 lots, long orders decreased by 9633 lots, short orders increased by 15204 lots; E-Mini Nasdaq 100 index futures and options net short positions increased to 8983 lots, long orders decreased by 2179 lots, short orders increased by 4150 lots; Dow Jones ($ 5) The net long position of futures options decreased from 7466 lots to 4526 lots, the long order decreased by 1017 lots, and the short order increased by 1923 lots.

From the perspective of position size, the speculative position of the small Dow, mini S&P 500 and mini NASDAQ 100 speculative position increased by 906 lots, 5571 lots and 1971 lots respectively; from the perspective of the change of net short orders, the small Dow, mini S&P 500 and mini Nasdaq 100 net short positions increased by 2940 lots, 24837 lots and 6329 lots, respectively. Positions show an increase in the strength of the shorts in the three major futures contracts.

Figure 4: Changes in speculative holdings of mini S&P 500 futures options

Source: CFTC International Derivatives Think Tank

Figure 5: Changes in speculative positions in options on E-Mini NASDAQ 100 futures

Figure 6: Dow Jones ($5) Changes in Speculative Positions in Futures Options

Fourth, hot concerns

Table 4: Hot topics ahead

Source: Golden Ten Data International Derivatives Think Tank

Table 5: Significant financial results for the week

Fifth, the market outlook

In the case of the overseas three quarterly reports exceeding expectations, the job market improving, and the economic data performance resilient, the three major indexes operated strongly. From a fundamental point of view, the US October Markit manufacturing and service industry PMI index, real estate investment, retail sales, personal consumption expenditure and other data show that the US service industry continued to improve, but due to inflation pressures and labor shortages, manufacturing production fell, and US inflation gradually transmitted downwards, inflation pressures heated up, the Fed policy reduction expectations were gradually determined, policy reduction interference weakened, but the discussion on the issue of interest rate hikes or further affect the market risk appetite. From the perspective of positions, the speculative positions of the major indexes on the past three have decreased, and the strength of the bears has increased, the strength of the bulls has weakened, and there may be pressure to cash in on profits in the short term. In the short term, as this week's technology stock earnings report landed, the third quarter earnings report speculation or gradually approached the end, the market will focus on the November FOMC meeting, risk appetite or gradually reduce, the market upward rhythm or slowdown.

This article originated from the international derivatives think tank