Markets finally got the message. Or, maybe Powell finally put it plainly enough: there will be more pain before the Fed eases.

continued for members…

ES came within .50 of its SMA50 this morning, but SPX still has a ways to go. Remember, the SMA50 was the source of many bounces in the rally through most of 2021. Algos are likely to remember.

ES is also on the cusp of a bearish 10/20 cross – the first since the bullish cross on Jul 6. And, just below the SMA50 is the 3.618 Extension at 3997.93 as well as the round number support from 4,000.

But, VIX is making good headway, having topped the SMA200 and seen a bullish (bearish for stocks) 10/20 cross.  In currencies, USDJPY is edging slightly higher to offset EURUSD edging slightly lower. Net net, DXY nudged a tiny bit higher toward 110.251. WTI is testing its SMA200 again.  This marks the 13th time since July 14 that it has touched the SMA200. In the next few days, the SMA50 will arrive as well – additional overhead resistance. While RB came within .05 of its Oct 21 highs on Friday and is going nowhere today. This leaves TNX going sideways with a potential flag pattern based on the Aug 26 highs of 31.86.You have to wonder whether more days like Friday will result in additional downward pressure on rates even as the Fed is ostensibly trying to hike rates. Of course, there’s a big difference between the short rates the Fed is hiking and the 10-yr, which they are probably content leaving as it is.

What makes this market so odd is the fact that the inversion between the 2Y and 10Y is huge and has so far shown no signs of correcting. Remember, it was the inversion unwinds that in the past were so damaging to equity prices – driven always by short rates cratering.