‘All Greed, No Fear’ Ahead Of Fed: VIX Hits 4-Year Low As Crude Carnage Continues

The market appears to be calling ‘Powell the Pusillanimous‘ bluff by rallying fearlessly (and selling vol unabashedly) into tomorrow’s FOMC (and Dot-Plots) meeting.

He wouldn’t dare stomp on the massive easing in financial conditions, right?

Source: Bloomberg

Or admit the economy is not doing so great?

Source: Bloomberg

Or admit that the ‘trend’ in CPI is disinflationary? (cough today’s SuperCore CPI bounced back above 4.00%)…

Source: Bloomberg

For now, the market remains of the opinion that every Fed member will be wrong about monetary policy next year – the question is: how many of those Fed ‘dots’ will sheep-like move to the market’s demands, or stay firm ‘higher for longer’ to stamp out inflation for good?

Source: Bloomberg

The disconnect between stocks and commodities in a weaker macro-environment is growing wider and wider as cyclical stocks (growthy) soar while cyclical commodities – Oil – plunge…

Source: Bloomberg

Who’s right? Or are they both right? Oil has priced in the recession and stocks have priced in the post-recession QE.

VIX was clubbed like a baby ‘fear’ seal back to an 11 handle…

…basically its lowest post-COVID close…

Source: Bloomberg

The vol-selling helped fuel more gains in stocks, led by Nasdaq. Everything accelerated higher after 1pmET. The last 30 mins of the day saw some profit-taking which dragged Small Caps into the red…

A solid 30Y auction appeared to trigger a massive buy program in stocks (at around 1pmET)…

Source: Bloomberg

After the massive short-squeeze on Dec 1st, the ‘most shorted’ stocks basket has chopped sideways unable to extend or reverse its trend (helped by the vol-crushing surge in long gamma)…

Source: Bloomberg

Treasuries were mixed today with the long-end outperforming (30Y -2bps, 2Y +2bps). This recoupled the wings (2Y and 30Y) as the belly is outperforming on the week…

Source: Bloomberg

The 30Y yield tested Friday’s lows, ramped almost 10bps on the CPI print and then faded back after the strong auction…

Source: Bloomberg

Despite a little hawkish pullback this week, the trend remains very dovish for next year (with 115bps of rate-cuts priced in)…

Source: Bloomberg

CPI sparked a kneejerk higher in the dollar (briefly into the green on the day) before fading back to red…

Source: Bloomberg

Bitcoin saw resistance at $42,000 once again and faded back today…

Source: Bloomberg

Spot Gold rallied intraday (but was unable to get back up to $2000) before fading back to $1980…

Source: Bloomberg

Oil prices puked again today, with WTI breaking below last week’s lows ($68 handle)…

That is basically the lowest level in the last two years and has historically been a significant support level…

Source: Bloomberg

Finally, as a reminder, the dramatic easing of financial conditions has erased all of The Fed’s rate-hike pressures since June 2022…

Source: Bloomberg

Is that really what The Fed wants?