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Of all the indicators out there, the VIX is the interesting one. It is currently over 32…again. And while it’s not the most extreme (high) it’s been, these levels have been followed by rallies for months now.

Clearly, this isn’t a guarantee for the ‘all clear’ out there. There is still a big mess. The Fed has all but assured the markets it is intent on crushing inflation — and it’s using the jobs market as its primary indicator of success — so the stock market can suffer while we wait to see if policy is having an effect. What is does suggest is perhaps the some are looking for a buy-the-dip opportunity. And it may be presenting itself.

With CPI and PPI numbers out last week, the Fed was undeterred in its rate hikes. While there will continue to be a trickle of economic updates – and earnings updates – the next big event is likely the Fed meeting itself in November, and the election. So, we’ll keep watching.

As far as this week goes, futures are pointing to a positive open. Okay… but we’ve seen huge swings in the last week or two. So futures, while an indication, haven’t been the bellwether we may have hoped for.  Such huge intra-day swings have brought up a lot of discussion about past volatility. Some circles are comparing this with 2008 (which, for those of us that survived it, know it’s not nearly as bad… at least, not yet).

Without digging up the specific study to prove it out, it’s still worth mentioning that the biggest single-day moves for markets tend to happen in periods of heightened volatility during market declines. Not exactly a fun statistic to acknowledge. But it does provide some insight into the cardiac nature of the swings recently. The market like we’re in recession. It’s not really asking if things are getting better; it’s asking where is the bottom?

So far, the technical set-up looks like there is more downside to come — probably below 3400 for the S&P 500 — but the short-term data suggests a rally from here.  Look for a re-test of the 3700/3725 level this week. If the markets can finish higher for the week, a re-test of the 3850 levels would be next.  If not, look for a dip below 3393, signaling a decline back below the pre-covid price peak (and a pretty solid show we’re in recession).

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