Prospects are evolving - within pattern prospects I've noted; to the chagrin of a contingent of naysayers that cannot grasp how the market could rebound.

Heck, I'm not analytically optimistic about economic or market prospects for the near-term; but did expect this move. Just too much negativity. That really was evidenced last week, when you had the greatest buying of Puts would you believe since 2008 or even when I called the 'Covid panic' March 23rd of 2020 low for S&P, which many market managers were chasing months later.

However valid the underlying bearish analysis (I agree about debt extremes of course); that doesn't usually correlate with stock market behavior, especially when they unanimity of negativity has nearly historic Put buying. Hence we'd expected (and got) the opposite, in the form of rally, regardless of what's next.

Also a degree of timidity is suspected to follow the next Fed rate hike; while it was pretty evident as I watched Christine Lagarde's 'demeanor & complexion' this morning, that she (ECB President) is concerned about inflation along with wartime energy prices caused by (essentially the enemy) counter-sanctions.

Furthermore I do grasp the concern of a 'systemic event' striking the market in this Fall's turmoil. (I suggested not just a rally but a 'bull-bear' rumble in last night's comments; and that's essentially what you have). No I don't expect the Fed to preempt the next rate hike, but I do envision 'why' the market holds just a bit longer (or higher supports if it now dips ahead of the weekend); because of next week.

What's next week? The CPI. And again the 'bear case' fails to emphasize the near-historic Put buying that preceded this; or a softer CPI pace of inflation; a development that would show disintegration of the post-Covid spending crazy times (ask travelers); and reticence to pay outrageous prices (as hoteliers).

In sum: this is a process; and the recession is indeed pointing to 'double-dip'; something I speculated a few weeks back might be the case. Everyone knows it at this point, and that suggests declines are points to eventually enter not to exit.

However earnings are a different set of dynamics than reviewing Fed action. If you look at a TIPS level, that market is saying the Fed won't stay-the-course to 'crush the economy' as super-bears expect. Rather it suggests the target (I think it doesn't get that low without a collapse; so there's that) 2% inflation of Chairman Powell's dreams. Oil plunged (and that is partially the leveraged Oil traders I warned would be killed; even as Oil would then prepare to rebound); the Dollar soared (a function of global currency near-collapse, which really is a big deal and alone contributes to lower multinational multiple expectations). 

Thursday was neither a bottom or a top; but a pretty stable upward consolidation after Wednesday's superb short-squeeze. Whether it was more remains to be seen of course (remember CPI next week); but it was interesting that again at least three super-bears protested the markets resilience or stamina; and more than one called for a 'crash'. Of course when you call for that it doesn't occur; at least not at that moment. In fact it was more like the extreme bearishness a couple of previous times. Well, we thought we'd get a rebound and we did. Of course there are alternatives going forward with fragility likely returning; but it is not a backdrop to facilitate the kind of catastrophe super-bears pretend as a certainty. It's not certain; although excessive turmoil is Sept./Oct. is very likely.

As you know, or can see; it's all complicated. Wartime economics historically are. And to that I'll add that the super-bears are missing the point not about a large 'debt' problem (we have all bemoaned that for decades really); but they underestimate both the Fed and the Treasuries (not just ours but Europe and even Japan's and China's) to 'print money'. Wars rationalize printing presses!

So 'if' people are grossly underestimating what the Fed is prepared to do; we shall see. We sure are not super-bullish; but it's illogical to join the horde of a bear-camp even as we're on the same side as relates to debt/inflation worries.

The Fed is tightening and inflation is percolating; but that will show change in next week's CPI (at least I'm thinking that); and maybe you get a huge blowoff rally after that? If so (and none of this is inscribed in stone), the bears totally freak, and they will vocally protest even more than you probably heard today.

And that is how you could more logically set the stage for several things: the Fed's next rate hike when they meet around the 20th of this month; and we'll see reticence between the CPI and the FOMC with lots of 'rate trepidation'.I also must point out anything can happen militarily during this time-frame too. 

Bottom line: the macro bears have been trotted-out and anticipate a 'crash'. I cannot say that's off the table; but it is exactly that fear which set-up the rally; and if that crowd had looked at the shorting and Put buying last week, they'd be in the camp I am, which expresses concern, but expected a bear run-in.

Now the 'rumble's' next phase can materialize; but choppy alternating shifts can dominate ahead of next week's CPI number; which will likely empower at least a gentler 'tone' from the Fed. 

Finally tonight .. reflecting when I heard the announcement QE 2 died; even of course as it was evidently coming to that outcome. Even weirder to hear “King Charles”.  As a kid I actually recall seeing Elizabeth's ascent to the throne, so I guess (being of an older generation now), I felt the significance of an historical moment.

I clearly imagine how a majority of British people feel, even the ones who not only want a republic; but are critical of the monarchy or the Windsors. It's just that 'She' was always there. It’s quite the end of an era. And I ponder if people really grasp what kind of an era, not just Britain, but the world, is in just now.

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