October started on a very positive note, even though the broader macro environment had not really changed. Yes two different central banks surprised investors with their moves. But one was to stem the slide in Gilts (and LDI margin calls), the other only by raising 25bps (which the RBA said they were going to do). The Fed however, is not in a position that warrants a change in their direction, and the +5.5% move in the S&P 500 early this week only cements their determination to tighten financial conditions.

Initially, today felt like a bit of a reign tugger — a pause from the prior 2 sessions of broad based gains. US markets slid lower in early trading, with DXY strength back in play (though well off of the LT resistance at 120), while other risk indicators such as bitcoin were under pressure. The dovish “hope bubble” was seemingly popped by the economic data, which showed better than estimated growth and companies hiring at a solid clip.

The fasten seatbelt sign is on, please remain seated until the sign has been turned off!…  Tuesday trading continuing the rally for a second day in a row this week amongst a stark change of tide from only a few days ago.  The S&P 500 seeing 98.8% of constituents trading higher on the day.  Last week saw 4/5 days into the red while the S&P (amongst a litany of add’l broad indicators) fell to and established new 52-week lows. 

Enjoying the job thus far Liz? Talk about making an entrance. Her favorability rating plummeted but at least she stuck by her guns and didn’t deviate from her plan within a week of announcing it. Umm…and while I’m not sure thanking her is the correct way to put it, at the minimum she’s introduced many of us to the concept of LDIs! The UK tax cut that wasn’t is just one of many macro headlines keeping markets on their toes. Judging by the green on the screen, they’re actually on the balls of their feet as they sprint higher. But those of you that read the View religiously knew this would happen because we told you as much on Friday. We jest but October has historically gone better post a poor September and that box was surely ticked last month. Seasonal trends are no match for the intensity of negative sentiment markets have been subjected to but for now Q4 is off to a strong start.

On the bright side, at least you’re not one of the 4 grandchildren in Denmark that was stripped of their royal titles…

US markets again feeling the inevitable weight of gravity after yesterday’s [short-lived] relief rally.  Market breadth scales tipped quickly back to the negative with all sectors firmly in the red for the session- (yes, including the ever-buoyant energy darling).  Crude slipping lower, unable to buck the trend even as OPEC+ discussing output cuts to come next week.

Turnaround Tuesday came a day late this week, but it will take more than one day to reverse the down trend. Not to mention, we have yet to break through the 3733 level on the S&P futures. Today’s move higher was spurred, in some part, by a recovery off the June lows. The shocking policy move by the BOE overnight also catalyzed some covering in markets, which lifted all assets off initial lows.

Tuesdays are the blah day of the week, not really doing much except to fill in the five day work week. But markets have deemed the day appropriate to shake off any Monday weakness, and hence the term turnaround Tuesday has been coined. With the S&P 500 closing at a one year low yesterday, today was full of potential for stocks, and indexes started in the green.

No capitulation to speak of yet, though positioning remains defensive and markets continued to slide lower today. Major indices flirted with June lows (SPX=3636, CCMP=10,565), but they held, as it seems we are at an inflection point from a technical/psychological perspective. Shorts may be more incentivized to cover at this point, rather than establish new shorts and/or double down. Nearly all sectors found their way into the red, barring a few, which eked out minute gains.

The negative momentum built and built and built, and the culmination was a day like today. There was a clear sell-off across the markets as indices tested their June lows (3639 on S&P futures and 11k on CCMP futures). The macro-environment remained little changed – 10-year yields remained above 3.67%, the resistance they blew through yesterday on the way to 4.0%. The dollar continued to steamroll everything in its path. The next technical target for the DXY is 120.