That was quite a bounce yesterday, especially considering that nothing new was learned from the FOMC and we still have the very real threat of a broader war in the Middle East which threatens the entire lower inflation/rate cut narrative.

continued for members…

Our base case remains a rally into the November election, but my job is to point out risks to the market. And, this remains a very real risk. If ES/SPX drift above their SMA20s, I’d be a little less nervous.

But, for now at least, I should point out that a lower reversal point would make more sense from a Fibonacci standpoint. Note also that ES’ SMA200 has now reached the 2022 highs – making for a nice backtest target if TSHTF. Likewise, SPX’s is at 5000.

The bulls need ES to hold the 2.618 at 5573…

…and VIX to remain below the SMA10, now at 16.59. It would also help if DXY would break down. And, as mentioned above, the recent pop by CL and RB (on the eve of an OPEC+ meeting) is a real threat to the equity rally. CL should remain below its SMA200…

…and RB shouldn’t top its SMA50 at 2.47ish. The 10Y has almost reached our 3.99 target and is a little oversold. Right now, it’s taking its cues from geopolitical risks and the expected rate cut. But,  it’s moving opposite to the signals being sent by the oil market. This cannot persist.Remember, there will be a YoY rise in gas prices and, therefore, inflation starting in October/November – even if prices just stay the same. This could be a headwind for stock prices after the election.

Bottom line, the easy bullish money has already been made. Getting ES up to 5935 or 5966 and SPX up to 5727 will take some work.

It is also interesting to note that some Wall Street heavyweights have thrown their lot in with Trump, meaning that they could very well be at cross-purposes with the folks who see a continuation of the rally as an important tool to keep Trump out of the White House.