Stock Market Outlook This Week – FOMC, Mag 7 Earnings and SPY Levels

I like the idea of remaining patient this week as there is a v big amount of event risk compressed into a very short window, and I would rather let the market show its hand before increasing exposure.

It is also worth noting that Trump announced the halt of strikes just as oil reached the $100 level which is the point at which I expected higher energy prices to begin forcing a more meaningful repricing of rates.

The FOMC policy decision is on July 29, followed by PCE inflation data on July 31.

With the Fed providing less forward guidance and there is far greater uncertainty around the path of interest rates, either event could produce a sharp reaction.

At the same time, four MAG7 companies report earnings – Microsoft and Meta report on July 29, followed by Apple and Amazon on July 31.

That creates a combination of both macro and single-stock event risk.

The options market is pricing an expected move of approximately 7% for META, with MSFT and AMZN closer to 6%. AAPL is lower at around 4%.

Given how last week’s earnings were received, the market is clearly not treating these reports as low-risk events.

AMZN is attracting bullish flows for now, but positioning still needs to be viewed in the context of the broader market-maker exposure. MSFT will be the first major report following the FOMC, and given the recent price action, I would prefer to see the initial market reaction before taking a stronger view.

We already know that META intends to spend more on capex, so I do not see that alone as a major risk to the broader market.

Microsoft’s earnings reaction is likely to be more important for software as a whole. A positive surprise could trigger an upside move across the sector. We are beginning to see high convition bullish flows in software, but it is still early.

The vol term structure of the SPX confirms that we are moving into a clear risk window. That absolutely needs to be reflected in trade sizing throughout the week.

Note that volatility is rising broadly in line with the scheduled event risk, but it is not yet showing signs of an extreme.

Policy uncertainty also tends to rise during election years, and the markets attention is likely to shift increasingly towards the elections over the coming weeks.

Economic policy uncertainty is closely correlated with stock-market volatility, meaning that when policy uncertainty rises, volatility generally rises alongside it.

In terms of SPY positioning, the regime remains negative following the move below 740. I am still unlikely to do much for now.

In addition to the volatility expected from this week’s macro and earnings events, SPY remains in a negative volatility regime. This means that market-maker hedging is more likely to amplify price moves while SPY trades below 746.

The 750 level remains the main resistance to the upside. For now, I may look to play a bounce from around 730, but with minimal positioning given the amount of event risk ahead.

Options-market volumes are not sending a particularly strong directional signal. Activity is skewed towards puts, but not by a meaningful margin.

Skew is also slightly bearish. Although it is beginning to decline, it still supports a more cautious stance.

For the past week or so, I have been avoiding the Qs because market positioning was very negative and the exposure building around the 680 strike did not offer an attractive setup.

Now that the Qs have reached that area while 700 remains the main resistance to the upside. I am also seeing some exposure beginning to build around $660 through longer-dated puts – this is not as strong a signal, but it is still worth mentioning.

Moving on to the VIX, today’s high-conviction flows were bullish and were a continuation from Fridays flow. Those flows are beginning to subside, but they still add to the broader cautious stance.

Volumes are also increasing to the upside, with some short-term positioning between 25 and 30. I would not overread the exposure at 70, as that is more likely to represent a tail-risk hedge than a realistic near-term volatility target.

On the positive side, some pressure may be coming off the high-beta trade as funding conditions improve. This can be seen in the decline in funding pressures reflected by AIR TRF futures.

Overall, I remain cautious heading into the week but I am not bearish. The decline in oil and easing funding pressures are supportive for rates and high-beta assets, while implied volatility is elevated in line with the event calendar rather than signalling outright stress.