New day, new sentiment. The same themes we’ve been tired of hearing about seemed ready to weigh on investors again this morning. A grind lower was expected, but we got just the opposite – markets bounced off their short-term support levels. S&P futures moved in the green after testing and holding the 3903/3900 August low, although as long as we remain below 4018/4022, the trend remains to the downside. One of today’s most notable events is the dip in oil. December 2022 Brent futures dipped below the support at $90, and the next technical stop is the March low at $85. Energy is unsurprisingly the underperformer, with all other sectors in the green. Utilities are the day’s outperformer as yields came off, and the energy crisis (as mentioned above) cracks on. Today also brought the Fed’s Beige Book. The report showed that growth had slowed, and consumer spending was steady. There was notable weakness in housing, and price gains appeared to be moderating. Today’s move higher likely aided by the dovish implications. The probability of a 75bp hike at the next Fed meeting is down to 76% from 80% this morning – the Fed has communicated how aggressive it needs to be, and nothing can change expectations in the short term. Then, there was the dollar, which has been an absolute steamroller. The DXY remains firm, hitting a 20-year high today, but it took a breather today before the next stop at 120. Finally, as tomorrow brings Chair Powell, keep an eye on the VIX, which (for now) remains well below the next stop of 30/30.22 on the way to 35.0. It would be surprising if his narrative were different, but the market may need a small reminder of his plans after today…
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