Remember Jackson Hole?
I've highlighted the S&P price movement headed into Jackson Hole, as well as where we stand today in the below chart.
As we headed into Jackson Hole, the sentiment with respect to Powell was unconcerned according to the put/call ratio. I've also highlighted the seemingly unconcerned state of the current investor population with respect to Powell's testimony tomorrow in the chart of the put/call below.
Why does this matter?
A consistent theme of the current Fed obsessed market has been that when the markets are unconcerned with Powell, downside becomes the predominant trend following his speech. When the markets are overly-concerned, a rally ensues.
Despite the fact that economic data has come in hotter than expected following Powell's last public speech in early February, investors seem to be in the camp that he will go against his own word of being data dependent in his decisions, with investors primarily relying on Powell determining that the PPI, CPI and jobs are all seasonal blips.
Additionally, tomorrow he is up against a group of fire breathing politicians who are being harassed by their constituents with respect to inflationary pressures compromising the earning power of the average American. Politicians want votes. Powell will be the punching bag.
In the face of this, with increasingly obvious signs of a pickup in inflation and with no slowdown in the economy in sight, Powell will be reluctant to strike a dovish tone.
All this while the markets have rinsed bears over the past few days via a short squeeze that leaves the market hollow, vulnerable and compromised into severe selling pressure should he strike a hawkish tone in a pattern that looks an awful lot like the early September peak following the August high.
Last week's low of 3928 is up for grabs this week. Look for the 3700 range to arrive at some point prior to the late March FOMC.
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