How to open up 50bp Sep cut
|S&P 500 pushed up early in the session only to reverse and deliver some intraday short gains. Basing around 5,615 support, this has held – but instead of data today (apart from oil, it‘s only Fed minutes), we‘ll get some stark job market revisions. As these haven‘t moved markets much yesterday, will they do so today?
Buyers may feel a bit disconcerted by seening a little red Tuesday – and the great swing ride following the post-yen Wednesday‘s flush and Thursday‘s unemployment claims being promptly bought, resulted in hefty 273 ES point gain for daily publications clients.
For a long time, I‘ve been writing about the disconnect between household and establishment surveys as regards job creation. And aligning the two is what gives dual mandate cover for 50bp Sep cut, the odds of which are merely 30% (and at least 75bp combined by Nov are just 49% - in effect it‘s Nov 50bp cut that is seen as more probable).
Let‘s have a look at the VIX and the state of the bond market – cautious sentiment before central banking moves. How much of the bullish price action and sentiment of disbelief has been worked off – how close are we to the next rally?
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