• SPX +0.69%
• COMP +0.76%
• RUT +0.81%
• DJI +0.64%
• WTI +0.71%
• BTC +0.44%

After floating around for most of the session, the market found a bid and gained momentum into the closing bell.   I mentioned in yesterday’s afternoon note that buyers are eager, but there are only two ways to get them back in the mix.

• Nibble at broad market dips
• Sense the train it is leaving the station

Interestingly, it’s the latter that gets buyers moving faster. The fact is, they want to be long.  I suspect there are a fair number of fence-sitters looking for more exposure before the FOMC announces their 75-bps rate hike on Wednesday.

There were roughly the same number of advancers than decliners in the overall market, and there were more 52-week new lows than highs on the NYSE and NASDAQ.  But up volume dwarfed down volume, indicating to me a much greater desire to be long at this moment.

Market Breadth	NYSE	NASDAQ
Advancers	1,865	2,186
Decliners	1,345	2,502
New Highs	15	42
New Lows	229	493
Up Volume	2.85 billion	2.37 billion
Down Volume	942.81 million	1.80 billion

Heat Map

Nine of eleven sectors finished higher with Materials coming out on top followed by Consumer Discretionary names.

Apple (AAPL)) looked solid, but I’m watching META (META) closely as a proxy on risk-taking and Microsoft (MSFT), which somehow hit a 52-week low during the session.

On the Edge

The key number for the S&P 500 is 3,900.  It goes back years as a pivotal number, and it failed last Friday.  That means its now a test of resistance – and it passed its first test closing at 3,899.85!

S&P 500

Recession Almost Official (again)

The 10y3m yield curve has edged even lower to 0.12, which means it could invert at any moment.  I hope it happens before the FOMC press conference.

Breaking Housing

Speaking of recession.  The NAHB confidence read was another disaster, decreasing for a record ninth month in a row.  That is something considering the financial crisis and pandemic.

In fact, outside of the sharp decline at the onset of the Covid-19 crisis, you must go back many years to see this kind of slump in six-month out prospective buyer traffic.

This reflects a full-blown housing recession that the NAHB says is mostly tied to policy mistakes.

Portfolio Approach

There are no sector weighting changes in our Hotline Model Portfolio.

Today’s Session

Equity futures have been lower all morning, as investors count down the conclusion of the FOMC meeting and rate hike tomorrow.

All eyes will be on Powell in that question-and-answer period, where he will be coached to sound tough. But he will also have to answer questions on increasing signs early Fed action is starting to work (as we know it works with a lag). The bond market is pointing to recession and more economic data is beginning to corroborate the rapid slowing of the economy.

Housing Market

Housing starts came in better than expected reflecting that period of retreating mortgage rates.  Housing permits on the other hand came in much lower-than-expected, which reflects certainty that mortgage rates will turn around and move higher.  Permits -10.0% consensus estimate -4.8%.

The S&P 500 is in a potential reverse head and shoulder formation – still has a way to go to break above neckline, which won’t happen at the start of trading.

All eyes are on the two-year treasury yield, which is racing at its steepest pace since 1994 and currently back to 2007 levels.

This is causing a mini-freak out and will be the source of a lot of questions tomorrow.

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