The Fed eased and nobody got paid
short conviction
- The repricing was real and the index ignored it.July core CPI printed +0.2% m/m off a 0.0% June, core year-over-year decelerated to 2.5%, headline held 3.4% — all four on consensus to the decimal. September hike odds fell from roughly 48% to 37.4%. The S&P added 0.26%. Ten points of policy repricing bought a quarter percent of index: equities had already decided the Fed was not the binding constraint.
- Beats are not being paid for.Cisco guided fiscal 2027 revenue to $72.2–73.4bn against a $68.69bn consensus and trades −5.79%. Cerebras beat both lines, raised the year, disclosed $25.4bn of remaining performance obligation, and trades −18.34%. Both rallied hard into the print. The disappointment is in the entry price, not the quarter.
- The hedge market and the vol market disagree.VIX fell 4.78% Wednesday while SKEW rose to 136.54, equity put/call sat at 0.61, and the VX curve held a +1.95 front contango. Tails bid, body sold. Dealer flow pins the body; nothing pins the tail.
- Breadth quietly stopped confirming.The share of the S&P above its 200-day closed at 69.38%, down 2.52 points, back under 70 after a 73.16 peak, and equal-weight lagged cap-weight by seven basis points. Renaissance Macro, measuring something else entirely, lands in the same place — see Section 05. A dovish surprise only the biggest names collect is not a broadening.
- What the structure will do to it.Dealers are long gamma, call wall 8,000, put wall 7,500 — 3.2% of room either way. PPI gets absorbed, not gapped. Today's range is a structure story; today's direction is an earnings-reaction story structure has no opinion about.
Where everything sits
| Instrument | Last | Change | Note |
|---|---|---|---|
| S&P 500cash, Wed close | 7,748.50 | +20.30 · +0.26% | 52-week high 7,793.68, set Aug 5. |
| Nasdaq CompositeWed close | 26,588.49 | +143.04 · +0.54% | Led on the day. The leadership died after the bell. |
| Dow IndustrialsWed close | 53,770.27 | −21.58 · −0.04% | The only major red on a dovish print. |
| Russell 2000Wed close | 3,045.48 | +18.37 · +0.61% | Took the rate relief; equal-weight large caps did not. |
| ES E-mini S&P Sep 2026 (ESU26) | 7,784.25 | +13.75 · +0.18% | Settled 7,770.50, a 22.00 premium to cash. |
| NQ E-mini Nasdaq Sep 2026 | 29,873.75 | +20.50 · +0.07% | Flat despite three semis names lower overnight. |
| YM E-mini Dow Sep 2026 | 54,002 | +131 · +0.24% | Leads the complex. |
| RTY E-mini Russell Sep 2026 | 3,058.90 | +6.10 · +0.20% | Extends Wednesday's bid. |
| WTI crude Sep | 82.00 | −1.27 · −1.53% | Giving back the geopolitical premium. |
| Brent Oct | 87.66 | −1.32 · −1.48% | Six-session rally snapped on Hormuz reporting. |
| Natural gas Sep | 2.781 | −0.023 · −0.82% | Storage at 10:30 is the only catalyst. |
| Gold Dec | 4,441.80 | −25.70 · −0.58% | Settled +0.99% at a ten-week high, now fading. |
| Silver Sep | 64.825 | −0.875 · −1.33% | Settled +1.04%. Same fade, larger beta. |
| Copper Sep | 6.5710 | −0.0445 · −0.67% | 30-day high 6.8665 unbroken. |
| US 2-year | 4.176% | −2.3 bp | 55 bp over the funds midpoint. See Section 07. |
| US 10-year | 4.672% | −2.0 bp | 4.70% Tue to 4.68% Wed. Duration barely paid. |
| US 30-year | 5.238% | −0.9 bp | The 1:00 auction is today's supply test. |
| 2s10s | +49.6 bp | +0.3 bp | Steeper by a rounding error. The curve shrugged too. |
| DXY | 99.903 | −0.111 · −0.11% | Reclaimed 100 Wednesday (+0.19%), giving it back now. |
| EUR/USD | 1.1534 | +0.0010 · +0.09% | No signal. |
| USD/JPY | 159.34 | −0.07 · −0.04% | Japan July wholesale inflation +7.2% y/y overnight. |
| VIX | 14.62 | +0.07 · +0.48% | Wed close 14.55, down 4.78%. |
| Bitcoin | 63,584 | +276 · +0.44% | Long-term trend still reads down. |
Single names — the after-hours damage
| Name | Wed close | Pre-market | What happened |
|---|---|---|---|
| Cerebras CBRS | 262.06 +11.63% | 214.00 · −18.34% | Beat and raised. Sold anyway. Biggest pre-market move on real volume. |
| Cisco CSCO | 123.88 +2.86% | 116.71 · −5.79% | Beat and guided far above the year. Sold anyway. |
| Coherent COHR | 355.64 +8.24% | 340.25 · −4.39% | Beat and raised Tuesday, fell 2.8%, still fading. |
| Nebius NBIS | 259.20 +34.14% | 249.40 · −3.78% | Wednesday's +34% was the AI-infrastructure bid in one bar. |
| Nvidia NVDA | 224.09 +3.03% | 224.17 · +0.04% | Flat. The $500bn financing is argued about, not traded. |
| Apple AAPL | 302.25 −0.87% | 303.54 · +0.43% | Nine-figure Siri publisher talks reported overnight. |
| Applied Materials AMAT | 548.15 +4.29% | 553.01 · +0.89% | Reports 4:30 PM ET, into the setup that just cost CBRS and CSCO. |
Index rows are Wednesday's close; everything else is live at 6:11–6:15 AM ET, each figure cross-checked against a second live source. Outside the two earnings names and Cisco, no mega-cap is moving on meaningful pre-market volume.
Sentiment & flow gauges
| Gauge | Reading | Prior | Read |
|---|---|---|---|
| CNN Fear & Greed | 62 · Greed | 59.8 1 wk | Momentum at 71 lifts it; price strength at 28.6 is in Fear. |
| AAII bull / bear wk ending Aug 5 | 37.0 / 38.0 | 31.0 / 42.1 | Spread −1.0 from −11.1. Still net bearish. |
| CBOE equity put/call | 0.61 | 0.84 total | Complacent on single names; index ratio 1.03 says otherwise. |
| SKEW | 136.54 | 135.59 | Rose while VIX fell. Someone is paying for tails. |
| VVIX | 88.5 | 88.5 | Vol-of-vol going nowhere. |
| Sept FOMC — hike | 37.4% | ~48% | Futures-implied post-CPI. Prediction markets: 33%. |
| S&P above 200-DMA | 69.38% | 71.90% | Back under 70 after a 73.16 peak. |
The flow read
Three independent reads describe one posture. Cboe has SPX skew at a one-year low across tenors. Citadel Securities has a record share of the index trading inverted three-month call skew. Goldman's volatility desk calls the stretch into the September FOMC a “complacency window.” Then Wednesday put SKEW up while VIX fell five percent. The demand has moved to the wings.
Yesterday's calls, graded
One print, one auction, one more semi
| ET | Event | Cons. / Prior | Note |
|---|---|---|---|
| 08:15 | Fed's Hammack (Cleveland) | — | Fifteen minutes before the print she'll be asked about. |
| 08:30 | July PPI, final demand m/m | +0.2% / −0.3% | Base effect flips off a negative month. Optics worse than trend. |
| 08:30 | July PPI, y/y | +4.9% / +5.5% | Six-tenths of deceleration already in consensus. |
| 08:30 | July core PPI, m/m | +0.3% / +0.2% | Feeds core PCE. Watch this, not the headline. |
| 08:30 | July core PPI, y/y | +4.2% / +4.7% | Producer core runs 170 bp above consumer core. |
| 08:30 | Initial jobless claims | 202k / 199k | Sub-200k last week. The hike case rests here. |
| 08:30 | Continuing claims | 1,800k / 1,801k | Flat for weeks. No re-employment problem. |
| 08:40 | Fed's Barkin (Richmond) | — | Ten minutes after the print, where the useful sentence usually is. |
| 10:30 | EIA natural gas storage | +31 / +33 Bcf | Only catalyst for a contract near 30-day lows. |
| 13:00 | 30-year bond auction | prior 5.058% | Long-end supply into a 5.238% thirty-year. |
| 16:30 | Applied Materials, FQ3 | $3.39 / $9.01bn | Third semi print in three sessions, into a +4.29% run-up. |
The asymmetry is not in the distribution — the structure absorbs both tails. It is that a soft print has to fight yesterday's evidence that good news is not being paid for.
Pivots, walls and the shape of the curve
Dealer gamma map — SPX and ES
| Level | SPX | ES Sep | Distance from cash |
|---|---|---|---|
| Call wall | 8,000.00 | 8,022.00 | +3.25% above |
| Cash close, Wed | 7,748.50 | 7,770.50 | — |
| Gamma flip | 7,579.15 | 7,601.15 | −2.19% below |
| Put wall | 7,500.00 | 7,522.00 | −3.21% below |
Cash sits 169 points above the flip, so a public dealer-gamma model puts the market firmly in positive gamma: hedging flows sell strength and buy weakness, the mechanical reason an in-line CPI produced a quarter-percent day. Net exposure across all expiries reads +$78.5bn per 1% move. The ES premium re-derives daily — translate levels with today's number, not last week's.
Cannon pivots — ES September
Pivot 7,772.08, resistance 7,795.67 / 7,817.58 / 7,841.17, support 7,750.17 / 7,726.58 / 7,704.67. Futures are between the pivot and R1. R2 sits almost exactly on the 30-day high of 7,820.25 from Cannon's own settle screen — a level with two independent claims on it is the one that usually holds first.
The VX curve
Spot 14.66, August 16.00, September 17.95, October 19.50, out to 22.40 by April. Spot-to-front +1.45, front-to-second +1.95 — textbook contango, no backwardation on the strip. September carries the FOMC and is not yet pricing anything unusual.
New and moved voices
He raised his year-end S&P 500 target to 8,400 from 8,250 on earnings momentum — the highest live target on the Street. This letter voided the 8,250 on Tuesday when he announced a revision he then put behind his subscriber wall; the level surfaced Wednesday and was restated twice on air.
The more interesting half: he argues the Fed should be tightening in September, on the view that July's soft-looking payroll headline was distorted by calendar effects and World Cup timing while most industries added jobs. He then noted publicly that the market is pricing hikes while the inflation data argues for cuts — naming the contradiction without resolving it. A strategist whose index target and policy call point opposite ways is worth reading twice.
His August checklist is the densest flows argument on the tape, and its framing is the useful part: “most of my inbound continues to focus on the same question: What can go wrong?… But for August, I think there is a more interesting one: Who becomes a buyer higher? The answer matters because the list of buyers is getting longer.”
The demand stack: roughly $1.6 trillion of year-to-date ETF inflows at $7.5bn a day, beating the record pace by 55%. Over $1 trillion of announced buyback authorisations, the largest ever at this point in the year, nearly 70% of it outside technology. And a valuation argument running the other way from the usual one: forward P/E at 20.1x against 23.1x last October — 15% of multiple compression while the index made new highs. He is explicit that the call is August-shaped, and his own breadth pillar has already softened — Section 10.
He holds 7,900–8,000 by month-end and simultaneously warns of a 10–20% drawdown in the August–October window — a combination that has read as evasive because he had never itemised the second half. He has now itemised it, and the list is specific: margin debt, which at roughly $1.5 trillion is a record and up about 50% year over year; an unresolved bond-market reaction to Kevin Warsh's new framework; the midterms; and the SpaceX lockup, where the August tranche was only the first and a far larger share of the company becomes tradable by December.
His timing is the uncomfortable part: he does not expect the pullback from here, he expects reaching the target to be what creates it. “Pullbacks occur when we're least expecting it, and usually when investors are bullish.” On rates he is unbothered by a 30-year at 5.24% — since 1900, he argues, yields travelling from 4% toward 6% have coincided with rising multiples, and 6% is where the damage starts. On the Fed he is more hawkish than the tape: September is “probably off the table,” a hike inside six months is not.
The most useful number anyone put on the table this week, and not the one being quoted. He will not argue with a market at new highs and says trend and breadth are confirming. But he flags a deficiency underneath: the share of names making 20-day highs is running in the mid-teens, when a market printing new highs should have 30–40%+ of its members there. That “belies the rotational aspect” of the rally — leadership is real but passed hand to hand, materials this week, healthcare last, rather than money arriving wholesale.
He is explicit about the cost: not bearish, but not the profile that lets anyone say we are fine for six months, stop worrying about a 10% correction. He wants those readings to stick first.
His sector call is healthcare: a long stretch of negative alpha finally breaking, led by biotech and pharma and now broadening into life sciences and services — and critically, relative performance improving, not just price. The sector is up roughly 14.5% in three months. On gold he is the near-term brake: overbought after a recent surge, so not a buy here, but build into weakness for a resumption of the uptrend.
The only genuinely contrarian argument of the week, and it inverts the consensus reading of a September hike. Most desks treat a hike as the Fed proving its independence. She argues the opposite: a hike would damage Warsh's credibility, not establish it — “it'll confuse people. Is the Fed just taking back a cut, or is it engaging in a hiking cycle?” A central bank that has already removed forward guidance has less room to be ambiguous about direction, not more.
She also supplies what nobody else on the tape has: actual retail order flow. Retail cut net buying into late July as the momentum names came apart, and has since come back — buying Sandisk, AMD and Micron, the memory and semis complex that led the drawdown. She frames July's hedge-fund failure not as a credit event but as structure, borrowing Jordi Visser's “speed crashes”: parabolic moves, sharp breaks, fast absorption.
The full roster
| Voice | Firm | Stance | Where they stand |
|---|---|---|---|
| Ed Yardeni | Yardeni Research | BULL | 8,400 year-end, raised Wednesday. Wants the Fed hiking. Full card above. |
| Scott Rubner | Citadel Securities | CROWD | Constructive on flows for August specifically. No index target. Full card above. |
| Michael Hartnett | BofA | CAUT | Bull & Bear Indicator 9.7 on a 0–10 scale, highest since 2021 and past the 8 that triggers sell. Next weekly lands tonight. |
| Aditya Bhave | BofA Securities | HAWK | Reaffirmed three 2026 hikes after the CPI print — the Fed taking back 75bp of cuts, September then December, October ruled out on midterm proximity. The hawkish pole against a market in the high thirties. |
| Jonathan Krinsky | BTIG | BEAR | Likens the run to late 2021 — new index highs while high-beta momentum is 25% into a drawdown. |
| Tom Lee | Fundstrat | BULL | Now itemises the drawdown he has been warning about. Full card above. |
| Jeff deGraaf | Renaissance Macro | NEUT | Trend and breadth confirming; 20-day highs are not. Full card above. |
| Stephanie Guild | Robinhood | NEUT | A hike hurts Fed credibility rather than proving it. Full card above. |
| Courtney Garcia | Payne Capital | BULL | New voice. Earnings are justifying the tape and the prints are answering the capex worry. Reads the long end as growth expectations repricing on AI infrastructure rather than an inflation signal — a bigger question for equities than September. |
| Savita Subramanian | BofA | BEAR | 7,100 year-end — 8% below spot, the lowest live target on the roster. No August update. |
| Mike Wilson | Morgan Stanley | HOLD | 7,800 year-end, carried. Most recent work argues quality matters again; nothing new this week. |
| Mandy Xu | Cboe | VOL | SPX skew at a one-year low across tenors; Russell 1-month IV at 16.9% is in the 2nd percentile and the Russell-minus-S&P vol spread has compressed to four points. The small-cap risk premium has been arbitraged away. |
| Mark Newton | Fundstrat | NEUT | “A bit more strength will be needed on a closing basis to claim a legitimate triangle breakout” — declines the call on the day QQQ closed at a three-week high. |
| Torsten Sløk | Apollo | NEUT | Of 200+ software and services names, only ten are expected to see revenue and EBITDA both decline over two years — the AI-disruption thesis is absent from the estimates that price them. |
| Sherry Paul | Morgan Stanley Private Wealth | BULL | New voice. “Investors definitely want to own equities as market supercycle is in.” The wealth seat, not the strategy seat that carries 7,800. |
| Malcolm Ethridge | Capital Area Planning | BULL | Reaffirmed with a horizon: the bull market runs “for the next few weeks.” |
| David Keller | Sierra Alpha Research | NEUT | Gold's breakout faces one final test — GLD resistance $4,500–4,600. |
| Liz Ann Sonders | Schwab | DARK | Spoke on the rotation Wednesday, nothing published. On a breadth question she is the voice you want, and she is not on the record. |
Ordered by weight on today's setup. Voices holding an unchanged view appear here only; new and moved voices get the full treatment in Section 05.
What the data actually said
The CPI internals cut both ways and the market priced one of them. Core rose 0.2% in July after being unchanged in June — a real monthly acceleration off a zero — while twelve-month core decelerated to 2.5% from 2.6%. The market took the year-over-year and marked down September; it did not mark up the monthly re-acceleration. Today's producer core asks the same question one step up the supply chain, and feeds core PCE more directly than CPI does.
The two-year is not saying what it is quoted as saying. The argument circulating — that it sits far enough above the funds rate to prove the market prices hikes while the data argues cuts — is directionally right and quantitatively stale. At 4.176% against a 3.63% funds midpoint the spread is about 55 basis points, not the 75 being repeated, and it narrowed yesterday. A closing spread is a market resolving the argument, not staging it.
The labour market is where the hawks are standing. Claims came in under 200,000 last week and continuing claims have been flat near 1.8 million for weeks. There is no re-employment problem in the data, which is why today's 8:30 claims number matters more than a routine weekly release. One verified sectoral crack: financial-industry payrolls fell 14,000 in July to 9.09 million. The claim circulating alongside it — a record $1.38 trillion of annualised federal interest expense at 4.2% of GDP — does not survive checking; the primary trackers put that ratio nearer 3.2%.
Energy stopped being the macro story. Brent snapped a six-session rally on reporting that Hormuz transit is normalising, against an IEA call for a 1.8 million barrel-a-day shortfall and the largest US crude build since early 2023. Crude at $82 rather than $90 removes the inflation tail that would have made today's PPI dangerous — and removes the alibi for metals, which is why Wednesday's gold and silver strength reads monetary rather than geopolitical.
The single names, told once
Cisco delivered the quarter of the night and is being punished for it. Fiscal Q4 revenue of $17.25bn against $16.82bn expected, earnings of $1.22 against $1.17, and a fiscal 2027 guide roughly four billion dollars above consensus — management is calling a networking supercycle and putting real revenue behind it. The stock rose 2.86% into the print and gave back twice that after hours. Nothing in the release explains it. The run-up does.
Cerebras is the same story louder. Core revenue of $209.9m, up 103%; an adjusted loss of four cents against twenty-one expected; a full-year raise to $880–890m; and the figure that matters, $25.4bn of remaining performance obligation with 600 megawatts contracted — a backlog near thirty times the revenue run-rate. It closed up 11.63% and is indicated down a fifth, the largest pre-market decline on real volume. A company can book that and still fall a fifth, if the price already assumed it.
Nvidia's $500bn financing package — Apollo, BlackRock, Blackstone, Brookfield, Goldman, KKR — is the live argument: whether an AI buildout needing the private-credit complex to fund it shows depth or stretch. Yardeni called it “a little bit of hype.” Others reached for 1999. The stock is flat, which is its own answer.
Coherent beat and raised Tuesday and is down another 4.39%. Nebius put up 454% revenue growth with $5.66bn of quarterly capex and rose 34.14% Wednesday — the one name paid for its quarter — and is giving 3.78% back. Apple is the only large cap green, on reporting of nine-figure publisher talks for Siri training content.
Applied Materials reports at 4:30 into a 4.29% one-day run-up, consensus $3.39 on $9.01bn — the third semiconductor print in three sessions. The first two both beat and both were sold. If the third is treated the same way, that is no longer a series of company stories.
Not blackout, and not quiet
Two speakers, Hammack at 8:15 and Barkin at 8:40, on either side of the print — the second is likelier to have something to say about it. September carries a high-thirties hike probability in futures and 33% in prediction markets, down from roughly 48% before CPI. The live question at this Fed is whether it goes up, not whether it cuts.
The date that matters is Jackson Hole, August 27–29 — Kevin Warsh's first as chair, on a programme titled Financial Innovation: Implications for Payments and Policy. He has already stripped forward guidance out of the statement as ill-suited to the moment, which is why the long end now trades on inference rather than instruction. Three of the arguments in Section 05 are ultimately about him: whether the 30-year is throwing a tantrum at the loss of guidance, whether a hike would establish his independence or muddy it, and whether the next move is September or simply somewhere inside six months.
The edge
The buyers-higher thesis rests on a statistic that expired two days after it was written
The most persuasive bull argument in circulation lists ten sources of demand, and one load-bearing pillar is that more than 70% of the index sits above its 200-day, the strongest since December 2024. That was true when it was written Monday. By Wednesday's close it was back below the seventy that made it quotable — and equal-weight lagged cap-weight on a dovish print the same session. Now put a second, independent instrument next to it. Renaissance Macro measures participation a completely different way — the share of names printing 20-day highs — and finds it running at roughly half what a market at new highs should produce. Two unrelated metrics, one built on a long moving average and one on a three-week window, are both saying the rally is being handed between sectors rather than lifted by fresh money. The flows argument is not wrong; the buyback and ETF numbers are enormous and real. But its participation leg is decaying in real time, and everyone quoting the note is quoting Monday's version. If breadth keeps slipping while the demand stack holds, the conclusion is not that the buyers left. It is that they are all buying the same few things in turn.
Nobody is pricing the possibility that the earnings reaction is the signal
Three semiconductor-adjacent companies beat in three sessions and all three fell. Each is explained away individually — a stretched run-up here, a margin line there, profit-taking. The pattern reading is simpler: this is what the top of a re-rating looks like from the inside. Not deteriorating fundamentals, but a market that has finished paying for them. Applied Materials this afternoon is the fourth data point and the cheapest test of whether this is three coincidences or one regime. Watch how it trades on a beat, not whether it beats.
The vol market has quietly split in two, and only half of it is pinned
Everyone can see the complacency: VIX at 14.55, skew at one-year lows, equity put/call at 0.61, and a dealer book long enough gamma to absorb a ten-point move in Fed pricing without a one-percent day. What is missed is that SKEW rose on the same session VIX fell almost five percent. Those describe different markets. At-the-money protection is being liquidated because dealer flow makes it a losing carry — correctly. Tail protection is being accumulated at the same time, by someone looking at the same pinned tape and drawing the opposite conclusion about what happens when the pin breaks. Positive gamma describes the distribution near spot. It says nothing about the distribution 3.2% away, which is exactly where both walls sit. The buyers of SKEW are not hedging today's range. They are hedging the day it ends.
eli@cannontrading.com · cannontrading.com
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