One story owned every desk, and it was not the Fed
by 32 points
- The relief in the long end is fiscal, not monetary.The ten-year is at 4.668% and the thirty-year is lower with it this morning, after Monday closed the ten-year at its highest yield of 2026 and the thirty-year at a level last seen in 2007. Nothing the Fed said moved them. What moved them was the Treasury announcing it will at least double the size of its long-bond buybacks — and a report that it may fund them out of a cash balance approaching a trillion dollars.
- Every strategist who published yesterday published on the same subject.Not earnings, not Nvidia, not the September meeting — the Treasury’s intervention in its own bond market and what to call it. The most common label is Operation Twist. The most useful disagreement is whether a programme this small can move a market this large, and the answers this morning run from “QE-like reflationary effects” to “nowhere near enough scale to matter.”
- The dealer ceiling came in two hundred points overnight.The call wall came down two hundred points on the new map while the floor did not move at all — the exact mirror image of what happened at Friday’s expiration, and it happened in one session. Writers showed up above this market for the first time in a fortnight, and they showed up a hundred and fifty points above cash rather than three hundred.
- Crude fell three percent into a live confrontation.WTI is down almost three percent and Brent close behind it because the Iran sanctions package landed well short of the maximalist version the market had been pricing. A shooting war with a shrinking risk premium is an unusual object, and it is the largest disinflationary input of the week — arriving thirty-six hours before the Fed’s preferred inflation gauge.
- Nothing that matters happens before tomorrow morning.Today’s calendar is housing and confidence with no Fed speakers on it. Wednesday carries core PCE, the second estimate of second-quarter GDP and Nvidia after the close. Friday carries Kevin Warsh’s first Jackson Hole keynote as chair. The front end prices a two-in-five chance that his September meeting delivers a hike, and no chance at all of a cut.
Where everything actually sits
| Instrument | Last | Change | Note |
|---|---|---|---|
| ES Sep S&P 500 E-mini, live | 7,697.25 | +0.36% | Settle 7,669.75, +16.89 over cash. Implied open +20.39. Overnight range 7,660.25–7,714.00 |
| NQ Sep Nasdaq 100 E-mini, live | 29,324.25 | +0.75% | Settle 29,105.75. Strongest of the four — a bounce off Monday’s tech drawdown |
| YM Sep Dow E-mini, live | 53,691 | +0.38% | Cash 53,417.16. The steady one all week |
| RTY Sep Russell 2000 E-mini, live | 3,018.00 | +0.55% | Cash 2,995.08. Small caps ahead of the S&P on a rate-relief morning, as usual |
| S&P 500 cash prior close | 7,652.86 | −0.28% | The ES 52-week high is 7,838.50 — about 2.4% above here |
| Nasdaq 100 cash prior close | 29,023.18 | −0.88% | Three times the S&P’s decline. Technology was the whole of Monday’s loss |
| VIX latest | 15.79 | −0.38% | Under sixteen into a week carrying core PCE, Nvidia and a chair’s first keynote |
| WTI Oct live | 82.50 | −2.95% | Settled 85.01 after falling 1.92% Monday. Two sessions, roughly five percent |
| Brent live | 89.61 | −2.78% | Spread to WTI just over seven dollars |
| Gold Dec live | 4,698.50 | +0.01% | Settled 4,697.80 after +1.04% Monday; a three-month high and holding it |
| Silver Sep live | 67.98 | −0.90% | Settle 68.59. Still up sharply on the month |
| Copper live | 6.642 | +0.55% | Settle 6.61. Long-term uptrend intact on Cannon’s board |
| Nat gas Sep live | 2.747 | −1.26% | Settle 2.84. Down on both of Cannon’s trend horizons — one of only two markets that is |
| US 10Y live yield | 4.668% | −3.6 bp | Closed Monday at 4.704%, the highest of the year |
| US 2Y live yield | 4.221% | −1.5 bp | 2s10s +44.7 bp, flattening as the long end leads |
| US 30Y live yield | 5.201% | −3.0 bp | Closed 5.231%, the highest since 2007. The number the whole argument is about |
| DXY live | 98.98 | +0.05% | EUR/USD 1.1670, USD/JPY 159.31 (+0.14%) |
| Bitcoin live | 79,231 | +0.55% | Futures settled 78,850 after +1.44%. Short-term uptrend, no long-term trend |
| Overnight Asia / Europe | — | — | Nikkei +0.5%, Shanghai +0.19%, Hang Seng −0.2%. Europe bid: DAX +0.50%, Stoxx 600 +0.33%, FTSE +0.14% — German GDP revised up, Ifo at a one-year high |
Sentiment & flow gauges
| Gauge | Reading | Prior | What it says |
|---|---|---|---|
| CNN Fear & Greed | 55 | 41 | Neutral, and flat for a week. Junk-bond demand is the only component at an extreme; momentum and price strength both read fear. Prior column is a month ago |
| AAII bulls | 35.5% | 34.7% | Below the long-run average for a sixth straight week |
| AAII bears | 39.9% | 37.9% | Spread −4.4 and widening. Week to Aug 19 |
| Dealer gamma regime | NEG | NEG | Third straight session with cash under the flip. Levels in Section 04 |
| E-mini S&P, non-commercial net | −10,560 | +11,280 | Flipped net short. Longs cut 16,392 and shorts added 5,448 in one week. As of Tue Aug 18 |
| SPY net flow, Monday | +$4.81B | — | QQQ went the other way at −$250.6M — the same rotation the sector tape showed |
| VIX term structure | +1.71 | — | September future 17.50 against 15.79 spot. Ordinary contango; no stress bid |
| Sept FOMC — hike | 39.9% | — | Hold takes the other 60.1%. A cut is priced at zero. Section 09 |
The NAAIM exposure index moved behind a subscription wall on August 1 and no current public reading exists, so none is quoted.
The flow read
The single most important thing on that second table is the line that flipped sign. Speculative accounts in the S&P e-mini were net long as recently as the middle of the month and are now net short, and they got there the hard way — selling out of longs rather than piling on new shorts. That happened while the index sat within two and a half percent of its record. It is very difficult to describe this tape as crowded when the futures crowd has already left it.
What is holding the market up is buying that has nothing to do with conviction. The corporate repurchase window is open, with the great majority of the index by weight eligible to bid its own stock, and Monday’s ETF flows show almost five billion dollars going into the broad index fund while the Nasdaq fund leaked. The sector tape said the same thing from a third direction: staples, financials and utilities all rose more than one percent on a day technology fell nearly two. Breadth barely moved — advancers edged out decliners on the NYSE while new lows narrowly beat new highs, and just under sixty percent of the index sits above its fifty-day average.
Put those together and the picture is a market being carried by mechanical, price-insensitive demand while the discretionary money reduces underneath it. That is not fragile in the sense of about to break. It is fragile in the sense that there is nobody with a strong view left to defend a level, which is exactly the configuration in which a negative-gamma tape produces a move that looks disproportionate to its cause.
Yesterday’s calls graded
A quiet Tuesday in front of a loud Wednesday
| When | Event | Prior | Why it matters |
|---|---|---|---|
| Tue 8/25 | Case-Shiller (Jun) 09:00 · New home sales (Jul) 10:00 · Consumer confidence (Aug) 10:00 · Richmond Fed 10:00 · no Fed speakers | 90.8 | Housing and the consumer, on a week nobody is trading either. The blackout ahead of the symposium is doing the talking |
| Tue 8/25 | Dick’s Sporting Goods, HEICO before the open · Intuit after the close | — | Intuit carries a roughly nine percent implied move — the largest single-name event before Nvidia |
| Wed 8/26 | Core PCE (Jul) 08:30 · Durable goods 08:30 · GDP Q2 second estimate 08:30 · 5-year auction 13:00 | — | The Fed’s preferred gauge, two days before the chair speaks in public for the first time as chair |
| Wed 8/26 | Nvidia fiscal Q2, after the close · Salesforce · CrowdStrike | $46.7B | The Street is near $91.9B of revenue and $2.07 of earnings against that year-ago figure. Options imply a 5.3% move |
| Thu 8/27 | Jobless claims 08:30 · Advance goods trade 08:30 · 7-year auction 13:00 · Jackson Hole opens | — | The published theme is financial innovation and payments. Nobody will hear it that way |
| Fri 8/28 | Chicago PMI 09:45 · Michigan final 10:00 · Warsh Jackson Hole keynote | — | His first as chair, three weeks before the September 16 decision. The Kansas City Fed publishes the agenda Wednesday evening |
Scenario language describes how desks and pricing frame outcomes. It is not a recommendation.
The ceiling moved down to meet the market
| Gamma level | SPX · +16.89 | ES Sep | Role in today’s tape |
|---|---|---|---|
| Call wall | 7,800.00 | 7,817 | Ceiling, and it came down two hundred points in a single session to sit 147 points above cash. A ceiling that moves toward the market is a different animal from one that stays away from it: somebody wrote size just above this market overnight, and that is now the nearest published structure overhead. |
| Gamma flip | 7,685.24 | 7,702 | The regime boundary, with cash 32.38 points underneath it. Below the line dealer hedging travels with price and extends moves; above it, against. ES has to reclaim 7,702 to put the tape back into the dampened state, and it is trading a handful of points below that right now. |
| Max pain | 7,675.00 | 7,692 | Today’s expiration magnet, 22 points above cash and just under the flip — what pull there is points up, into the boundary rather than through it. It recomputes through the session, so read it as a fifteen-point zone; it is the one number here that is not settled. |
| Put wall | 7,500.00 | 7,517 | Floor, unmoved for a third session and 153 points under cash. The corridor between the walls is now three hundred points wide against five hundred yesterday, and all of that compression came from above. |
Gamma levels from a public dealer-gamma (GEX) model, computed on the August 24 close.
What Cannon’s own levels say
The September contract’s daily pivot is 7,676.50, with R1 at 7,698.00, R2 at 7,724.75 and S1 at 7,649.75. Two of those are worth sitting with. The pivot is a piece of arithmetic run off yesterday’s high, low and close by a formula that knows nothing whatsoever about options — and it lands twenty-six points under the gamma flip in futures terms, with today’s max pain converting to a level between them. Three unrelated methods have put the day’s centre of gravity inside a thirty-point band.
The second is more specific. On today’s expiring E-mini option chain, the two heaviest concentrations of call open interest sit at the 7,700 and 7,725 strikes, with roughly 3,800 and 3,600 contracts outstanding. Cannon’s R1 is 7,698.00 and its R2 is 7,724.75. The pivot table and the option chain have independently nominated the same two prices as today’s resistance, within a couple of points each. On the downside the same chain’s largest put position sits at the 7,500 strike — the identical number the all-expiry model calls its floor. Near-dated and all-expiry structure agreeing on the floor while disagreeing about the ceiling is information, not an error: today’s book wants to pin here, the fuller book still has room above.
Trend and structure
Cannon’s trend read on Monday’s closes has one change worth flagging. The S&P contract still carries an uptrend on both the short and long horizons; the Nasdaq contract has lost its short-term arrow and holds only the long-term one. That is the first divergence between the two index contracts on this board in weeks, and it lines up with everything else on the tape — Monday’s decline was almost entirely technology. Elsewhere gold, silver, copper and crude all keep their short-term uptrends despite crude’s two-day fall, and only two markets on the whole board point down on both horizons: the thirty-year Treasury and natural gas. The thirty-year being the single weakest structural row on a page of otherwise constructive markets is the entire argument of this letter in one cell.
Five voices, one subject, no agreement
Yardeni published late Monday night under the title “The Latest Pitch of America’s Top Bond Salesman,” and his framing is the one the rest of the Street is now borrowing: this is the start of the Treasury’s own version of Operation Twist. He lays out three separate actions taken inside a week — a rare US intervention alongside Japan to support the yen, a doubling of buybacks of ten- to thirty-year paper to $4 billion per operation, and the possibility that Treasury draws on a General Account balance approaching a trillion dollars to fund expanded long-bond purchases.
The number he attaches to it is historical rather than predictive, and it is the most useful thing anyone published on this yesterday: the 2011 Twist is estimated to have lowered ten-year yields by 15 to 25 basis points. That is the order of magnitude the market is being asked to price, against a long-end move that has been considerably larger than that. On television the same morning he made the complementary point — a ten-year yield in the mid-fours is simply back to normal for an economy performing this well, not evidence of anything breaking. No S&P target was published inside the window and none is attributed to him here.
Zervos gave the day its most precise sentence, and it is a warning dressed as a technicality. What Treasury is running is, in his description, a Treasury-led Operation Twist — and emphatically not quantitative easing, because no reserves are created. That distinction is what lets officials describe the programme as liquidity-neutral and be telling the truth.
His second half is where the money is: it is not QE, but it carries “QE-like reflationary effects.” Duration is being taken out of private hands even though the money supply is untouched, and duration is what the market has actually been choking on. If he is right, the correct read on the last two sessions is not that the Treasury rescued the bond market. It is that the Treasury has begun easing financial conditions from outside the Fed, three days before a Fed chair who has staked his credibility on price stability speaks in public for the first time.
Wilson is the only major strategist on the tape who reached a cautious position from oil rather than from rates. In a Monday note reported by Bloomberg he names a renewed spike in crude — not the long end — as the single biggest risk facing US equities, and routes the hedge through energy shares rather than through cash or duration. The transmission he describes runs from oil to inflation to yields to a Fed under Kevin Warsh eventually forced to act.
Two caveats belong on this one. His year-end index target was not restated inside the window and is not repeated here. And the argument is now under live stress from the tape itself: crude has fallen roughly five percent in two sessions on a sanctions package that landed soft. His firm’s commodity strategists separately carry a Brent path rising through the third quarter toward roughly a hundred dollars by the fourth — a house forecast, not his, and one this morning’s price is moving directly away from. If the oil risk is real it is a fourth-quarter story, which makes it a poor reason to be defensive in August.
Walsh gave the long end a price on Bloomberg Television on Monday, which almost nobody does in public. At a thirty-year yield of 6% she would, in her phrase, back up the truck. That is roughly eighty basis points above where the long bond trades this morning, and it reframes the whole debate: the buyback programme is not, on her arithmetic, defending a level anyone is close to. It is smoothing the path to one.
The useful part for a futures trader is the implied floor under risk appetite. A named institutional buyer with a stated level and stated size at six percent is a very different market structure from one where the long end is falling with no bid underneath it, and it is the reason several desks are willing to describe the current back-up as orderly. It also sets a marker anyone can grade: if the thirty-year gets there, we will find out whether the truck exists.
Bianco supplied the day’s cleanest inversion and it deserves to be read twice: if you want long-term yields to go down, Kevin Warsh should come out and talk about raising rates. The logic is that the long end is not selling off because policy is too tight. It is selling off because the market doubts the inflation fight is finished, and a credible hawkish chair removes that doubt at the far end of the curve even as he raises the cost of money at the near end.
If that is right, then every buyback operation is treating a symptom, and Friday’s keynote matters far more to the thirty-year than any number of four-billion-dollar purchase windows. It also produces the uncomfortable corollary that the bond-friendly outcome on Friday and the equity-friendly outcome on Friday may be opposite trades — which is not how this week is currently being positioned for.
The roster, and where it has landed
| Voice | Firm | Stance | Where it stands this morning |
|---|---|---|---|
| Ed Yardeni | Yardeni Research | BULL | Named the intervention before anyone else did. Section 05 |
| Mike Wilson | Morgan Stanley | CAUT | Restated risk flag on oil, not a target revision. Section 05 |
| David Zervos | Jefferies | NEW | Not QE, but reflationary. Section 05 |
| Anne Walsh | Guggenheim | NEW | A named buyer with a stated level on the thirty-year. Section 05 |
| Jim Bianco | Bianco Research | NEW | Hike to lower the long end. Section 05 |
| Ken Griffin | Citadel | RISK OFF | Disclosed unwinding more than 80% of one large AI-linked risk position through 100-plus blocks. Section 08 |
| Michael Hartnett | Bank of America | CONDITIONAL | Bull & Bear indicator eased to 9.3 from 9.7; still describes positioning as excessively bullish and still says the trade is long gold. Aug 23, carried not restated |
| Krishna Guha | Evercore ISI | HOLD | Treasury action complicates things but is “not a Fed game changer for September.” Section 07 |
| Tobin Marcus | Wolfe Research | SCEPTIC | Buybacks need far more scale to matter. Section 07 |
| Mohamed El-Erian | Queens’ College, Cambridge | NEUT | Market pricing is leading the Treasury, not the other way round. Section 07 |
| Chris Verrone | Baird Strategas | ROTATION | First stance recorded: healthcare remains a winner in the rotation. No index call published |
| Dan Greenhaus | Solus Alternative Asset Management | NEUT | Equity and credit markets have not cared very much about yields — an observation about transmission, not direction |
| Bill Miller IV | Miller Value Partners | NEW | Says bitcoin’s comeback was sparked in part by money rotating out of the AI complex |
| Stacy Rasgon | Bernstein | BULL | Outperform on Nvidia at $315, but warns good numbers may still get a muted reaction. Section 08 |
| Tom Lee | Fundstrat | BULL | Reads the General Account report as positive for long-duration assets. Target graded in Section 02 |
| Jonathan Krinsky, CMT | BTIG | BEAR | The midterm-year seasonal peak he flagged for August 18 is now seven sessions old and the index is roughly flat against it. Carried, not restated |
| Mark Newton, CMT | Fundstrat | BULL | Levels unchanged and untouched. Graded in Section 02 |
| Scott Rubner | Citadel Securities | DARK | Nothing published since Aug 11. The firm’s newest macro note is another author’s and is used in Section 07 under the firm’s name, not his |
Two seats on this roster remain vacant and no fresh call is attributed to either: Christopher Harvey, formerly of Wells Fargo, and Jonathan Golub, formerly of UBS.
Measuring the intervention, and the barrel underneath it
Start with the size, because the argument has run far ahead of it. Citadel Securities published the most rigorous public accounting of the programme yesterday, and the numbers are modest. The per-operation cap on liquidity-support buybacks of ten- to thirty-year paper at least doubles, from two billion dollars to four, and seven relevant operations remain on the published schedule through November 4 — implying at least fourteen billion dollars of incremental buyback capacity. Set against expected quarterly issuance in the twenty- and thirty-year sectors, that is roughly 13%. The firm’s own framing matches Jefferies’ almost exactly: broadly liquidity-neutral, nowhere close to duration-neutral. It also notes that Japan remains the largest foreign holder of Treasuries at around $1.12 trillion, about twelve percent of reported foreign holdings — which is why a yen intervention and a buyback programme landing in the same week are not two stories.
Thirteen percent of one sector’s issuance is why the sell-side reaction has been so split. Tobin Marcus at Wolfe Research says flatly that the operations would need far more scale before they change anything the Fed has to think about. Krishna Guha at Evercore ISI grants that it complicates the picture but calls it not a game changer for September, while making the larger observation that activist Treasury policy has become as material to markets as monetary policy — a structural claim that outlives this week. Mohamed El-Erian put the sequencing the other way round on CNBC: market pricing is leading the Treasury, not the Treasury leading the market. Read together, three independent desks agree the programme is too small to be the cause and disagree about whether that makes it irrelevant or ominous.
Which brings the day back to oil, where the actual disinflation is happening. The Iran sanctions package landed short of the maximalist version that had been priced, sparing major Chinese banks, and the crude complex has taken roughly five percent out of the price across two sessions. That is a live confrontation with a shrinking risk premium, and it is a bigger input into Wednesday’s inflation print than anything on the calendar. The counterweight sits in Europe, where Dutch TTF gas has pushed above €68 per megawatt hour, the highest since January 2023 — an energy squeeze nobody in the US complex is pricing, in the region whose data surprised to the upside overnight.
Everything is a bet on one print now
The setup into Wednesday. The Street is looking for roughly $91.9 billion of revenue and $2.07 in earnings from Nvidia against $46.7 billion and $1.04 a year ago, and the options market implies a move of about 5.3% — on this market capitalisation, close to $280 billion of value repricing in one session. The sell-side previews are uncommonly unanimous in their nervousness about the setup rather than the business. Goldman Sachs carries a Buy at $285 with estimates six to twelve percent above consensus and still writes that a routine beat-and-raise is no longer enough after a double-digit two-week run, noting the stock has fallen the day after each of its last four reports. Stacy Rasgon at Bernstein is Outperform at $315 and makes the same point from the other side: watch the next-generation ramp and the customer-financing arrangements, and expect that good numbers may get a muted reaction anyway. Citi sits at $300. Raymond James lifted its target to $352 on Monday and simultaneously upgraded AMD to its top rating with a target of $641.
What Monday actually looked like underneath. Technology fell 1.78% while staples rose 1.70%, financials 1.29% and utilities 1.05% — a near-perfect defensive rotation on a day the index only lost a quarter of a percent. Micron dropped nearly six percent, AMD and Broadcom each more than two. That is money leaving the AI complex on the eve of its biggest event, not arriving for it.
Where the largest disclosed seller went. Ken Griffin disclosed on Friday that Citadel had unwound more than eighty percent of one large AI-linked risk position through over a hundred separate blocks totalling more than four billion dollars. That trade was put on near the AI complex’s low. Whether last week’s semiconductor slide is the retest of that decision is the open question the print answers.
The financing pattern. Alibaba priced a $10.2 billion Hong Kong placement at an 8.4% discount, the largest primary follow-on that market has seen, and the stock fell 8.5% on Monday. Samsung’s shareholder-return plan disappointed in the same session. Dilution to fund AI infrastructure is now a pattern rather than an event, and the market’s tolerance for it has visibly hardened.
Also on the tape this morning. Intel is up nearly four percent on its Hot Chips disclosures and the memory complex is bid with it. Dick’s Sporting Goods missed on both lines, citing a challenging footwear market. Boeing is higher on a large fighter award. Intuit reports after the close with a roughly nine percent implied move — the biggest single-name risk on the board before tomorrow evening.
A quiet week for the Fed, ending in the loudest speech of the year
There are no Fed speakers today and none scheduled before the symposium — effectively a self-imposed quiet period. Kevin Warsh has been chair since May 22 and has not yet given a set-piece address on where he is taking policy. He does that on Friday, in his first Jackson Hole keynote, three weeks before the September 16 decision. The Kansas City Fed publishes the agenda tomorrow evening, so even the start time is not yet fixed.
State the pricing question plainly, because it is the opposite of the one most readers have spent three years asking: this front end is debating whether the Fed hikes in September. The target range is 3.50–3.75%, the July meeting held with three dissents in favour of a hike, and the strip now assigns roughly two-in-five odds to a move at the next meeting with nothing at all priced for a cut. Wednesday’s core PCE is the last major input before the chair speaks.
One historical note worth carrying, from Barclays, since almost nobody is positioned for the scenario it describes. In the quarter following a first hike, the median outcome has been the Russell 2000 down 7.2% against the S&P down 3.9%, with financials the worst sector at −8.4% and energy the only one to gain. Value outperforms growth throughout. Barclays’ own economists do not expect a hike through the first half of 2027 — which is precisely why the study is useful: it is the map for the outcome the house does not forecast, and financials have just run up thirteen consecutive weeks into it.
The closer
The AI complex has quietly stopped being correlated to the market it is supposed to be driving.
Reporting on Monday put the forty-day correlation between the large AI basket and the S&P excluding AI at roughly minus zero point six — deeply negative, and for the first time. Sit with what that implies about tomorrow evening. The index has been running an internal hedge for weeks: when the AI names go one way, the other four hundred and ninety-odd go the other, and the two partially cancel at the index level. That is precisely what Monday looked like, with technology down almost two percent and the S&P down a quarter of one. So the straddle on Nvidia may be perfectly well priced for Nvidia and badly wrong for the ES, because the mechanism that has been absorbing single-name moves into rotation rather than into index range is still switched on. Positioning for a big index move because a big single-name move is coming assumes a transmission that stopped working weeks ago.
Nobody is short this print. That is the part that should worry the bulls.
Prime brokerage data shows funds sold technology at a record pace in July, leaving net exposure to the mega-cap complex at the low of the year, and speculative accounts have since flipped net short the S&P e-mini outright. The whole market has spent a week describing tomorrow as a high-bar event into crowded positioning. The data says the opposite: the crowd already left, which is why every sell-side preview is warning about the setup rather than the numbers. The consequence is not that the print is safe. It is that the asymmetry has inverted from where everyone thinks it is — a good number has fuel behind it because there is very little left to sell, and a disappointment lands on a book that has already reduced and therefore has less mechanical selling to do. The violent outcome this week is more likely to be up than down, and almost nobody is describing it that way.
The largest disinflationary event of the week has already happened, and it happened in a war zone.
Every desk note this morning treats Wednesday’s core PCE as the inflation input that matters. It is a July number. Meanwhile crude has taken roughly five percent out of its price across two sessions because a sanctions package aimed at Iran landed materially softer than the market had priced — a live military confrontation producing a falling risk premium, which is close to a contradiction in terms and is the single most consequential price change on the board. The Morgan Stanley argument that oil is the biggest risk to equities was written for a world where that premium expands. If instead the barrel keeps deflating, the September hike debate loses its most powerful supporting argument, the long end loses its inflation excuse, and the entire structure of this week’s trade — buy energy as the hedge, fear the print, wait for the chair — is built on a variable that has been moving the wrong way for two days while everyone watched a bond auction schedule.
eli@cannontrading.com · cannontrading.com
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