Good Morning! Despite a hot PPI reading, markets closed flat on the day.
It is interesting that no matter what bad news comes, markets stay resilient. I know that a lot of the PPI doesn’t read through to the PCE report which is the Fed’s preferred inflation gauge, but there were a lot of readthroughs that I think many weren’t expecting. The most compelling was services inflation was happening. I don’t know when that will read through to the overall market, but I think September rate cut odds are a bit too high. I would give it a 60% chance of happening depending on PCE data.
Today is opex, and it is time to start looking forward to September. What are we seeing in the options over the next month?
Really, the critical thing to know is that 6500 is an extremely strong resistance. We can peek over for the next month, but the overwhelming odds are on this area being a local top. If Trump comes away with a ceasefire today, it might pop above 6500, but then drop. There is also very little put support below. It only starts at 6375, so upon any bad news that actually drops markets, I would expect to see some overvixing, but no vol event until we drop 200 points.