The OPEX meltup continued overnight, with futures up modestly to new 9-month highs.
Powell speaks at 11am ET and might shed some light on the implications of treasury yields which have pushed to new cycle highs – reflecting a much more cautious assessment of the debt ceiling negotiations.
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Yesterday’s 1.2% spurt higher was driven not only by the usual push in USDJPY and plunge in VIX, but a healthy dose of hopium regarding the debt ceiling crisis. Congressional and White House reps were nearly unanimous in declaring that a deal is as good as done.
Whether they’re speaking the truth or simply trying to avoid a market meltdown a la 2011 remains to be seen. 
Both SPX and ES saw a bullish 10/20 cross, but it could unwind if ES closes back below the former resistance at 4166. Keep on eye on the ever proficuous VIX, which usually triggers algos to buy any significant dips by breaking below support such as the purple channel bottom below.
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We’re starting to see cracks in the equities and bond markets related to the debt ceiling. Interest rates are ratcheting higher. And, although OPEX-related maneuvers are working to prop up stocks, we had a momentary breakdown in SPX yesterday.
Utilities, a bond proxy for some, have taken a big hit this week as investors shift into shorter-term, less volatile treasuries.
Which would you rather own, XLU with a beta of .56 and yield of 3.01% or a 6-mo Tsy paying 5.25%?
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The market has frustrated both bulls and bears lately, vacillating between sharp downturns and even sharper recoveries. But, a close examination of the charts shows two very obvious patterns that suggest the tide is about to turn – not in a good way.
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After a brief respite, bank stocks are again under pressure with deposit flight and CDS both pointing to escalating concerns.
Neither the April CPI nor PPI prints support the notion that the Fed will lower rates any time soon – keeping the pressure on banks and an economy that depends on easy access to cheap credit.
Futures backed off the key 4166 threshold again yesterday, only to bounce back and test it again overnight.
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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.
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Futures are essentially flat ahead of today’s pivotal FOMC decision and press conference. This follows a day that saw stock prices plunge below our initial backtest target…
…as VIX actually broke out – at least for a few hours. 
The banking crisis obviously hasn’t gone away. How many more First Republics or Silicon Valley banks are out there – clicks away from a bank run? Even those banks which aren’t already in trouble will most certainly cut back on lending, which will certainly raise the odds of a (worse) recession.
Will the FOMC take that into account as they contemplate future actions?
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Futures are off modestly in the run-up to tomorrow’s FOMC decision.
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After establishing a well-formed falling channel and positioning for a bearish 10/20 cross, SPX soared last week on – what else? – another collapse in VIX.
In the process, the 10/20 cross was (at least) delayed and the channel busted. It’s normal activity for the lead up to a Fed meeting. Perhaps “price discovery” should be renamed “price setting.”
Perhaps we shouldn’t be surprised to see similar goings on in other “markets” such as silver.
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GDP increased at an annual rate of 1.1% versus expectations of over 2% and Q4’s 2.6%, fueling both recession fears and expectations that the Fed will soon halt rate hikes after next week’s 25 bps increase.
Futures dipped on the news but have since rebounded as the usual VIX smackdown convinced algos to look on the bright side.
For now, algos are ignoring the hotter Q1 PCE data embedded in the GDP print.
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