While the investing world argues whether the FOMC will or should raise rates a whopping 25 bps, the bond market is sending a strong message that markets are on the brink of a significant move.
Futures, drawn higher by the usual pre-meeting meltup, are oblivious.
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How bad will it get? That’s the question slamming markets this morning as Credit Suisse is again in the headlines for all the wrong reasons: The Saudi National Bank has cut them off from further financial assistance. The CDS have soared and the stock is getting ever closer to zero.
Futures were essentially flat after a very nice rebound yesterday – until the news hit. Now, they’ve given up essentially all of yesterday’s gains and some important technical support.
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Bottom line, a 50 bps rate hike is back on the table. We got the backtest we expected, and even a little bit more. 
This morning’s ADP employment report further underscores the need to put the brakes on the economy. It will be interesting to see whether Powell’s tone becomes any less hawkish in light of yesterday’s sell off.
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Last week completed the backtests we’d been expecting, with ES, SPX, COMP, DJIA and NKD all holding important technical support.
While the fundamental picture might not justify these prices, the algos are satisfied. And, until price discovery reemerges (if it does), the algos are all that matter.
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Futures have dropped back through the 50-day moving average, putting the 200-day back in focus after yesterday’s near miss.
We’re essentially in the same situation as yesterday except that we’re jumping off from a much lower level.
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The FOMC’s meeting gets underway today. Like most, this one seems very consequential. The Street is divided on whether or not the Fed has done enough to combat inflation as well as the necessity of a recession.
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According to Reuters, Microsoft’s Chief Executive Officer, Satya Nadella, and other Microsoft executives used the words “caution” and “cautious” at least six times during yesterday’s call.
The stock, already locked into a falling channel from last November…
…reversed its initial pop and is leading the broader indices lower this morning. 
Remember, MSFT is the second largest component of the S&P 500. Futures are off over 1% as we approach the open.
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Futures are essentially flat this morning after Friday’s OPEX panic to regain the 200-day moving average.
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Futures are up over 0.65% even as VIX has popped 6.25% in the after hours.
What gives?
There’s actually a lot of reshuffling going on this morning, with important implications for currencies and equities.
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Futures are up moderately as we approach the open, gaining back much of the losses suffered yesterday in the wake of a dismal pending home sales print (-4.0% versus -0.8% expected, the worst since inception in 2001.) Prices fell MoM for the fourth month in a row.
At this point, it appears the bulls are ready to take a knee and let the clock run out on 2022. Unfortunately, 2023 should prove even more difficult.
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