Futures are off modestly after a more hawkish Q&A with Powell than many expected. ES came within a few points of the 50-day yesterday. Based on the overnight action, it should reach our next downside target with ease.

It didn’t help that unit labor costs shot up 6.3% for April versus the 3.3% prior and 3.6% consensus. Perhaps the three rate cuts the market has been pricing in by year end don’t constitute such a great forecast.

continued for members…

Our downside targets are all still in play, with the SMA50 the first significant test. It’s much closer for ES at 4064.80 than for SPX at 4036. If SPX reaches 4036, ES would test the bottom of its falling red channel at 4041.77ish.

As usual, we’ll need some cooperation from VIX, which has tested the red dotted TL (just below 20) a total of six times since Mar 30.Currencies are largely on the sidelines this morning with the exception of GC, which briefly topped its March 2022 highs and came very close to its August 2020 highs. Note that DXY continues to hold horizontal support.

CL was off nearly 7% overnight, but has since bounced back to a -0.45% decline, while RB continues to slip lower.  I expect 59.12 or even 53.87 by late June.

TNX still looks likely to test 32.16, a modest decline compared to what the 2Y might experience if it continues to break down as the 10Y has.

GLTA