LiveWire

S&P 500 futures are up 0.5% after the selloff triggered by the Federal Reserve Chair Powell's strong words on more financial conditions tightening needed to bring down inflation. Traders are still in fear that the Fed's quantitative tightening and a spike in the dollar could trigger a recession. From a technical perspective, we are around a 50% retracement of the rally from the June lows.  The S&P 500 could find some support around current levels or slightly below. 

European gas prices fell as much as 21% on Monday after a huge weekly gain. German gas storage is progressing ahead of target, an encouraging sign for the region that is fighting cuts in gas supplies by Russia after the gas pipelines have been halted several times. Governments are also putting in place measures to ease the burden of higher energy prices on consumers. The euro jumped 0.5% on the news, above parity with the dollar. 

Risk assets have been seeing some pressure since last Friday following remarks from Fed Chairman Jerome Powell at the Jackson Hole meeting. Powell said the effort to reduce inflation "will also bring some pain to households and businesses." This is leading Market participants to believe that the Fed is going to keep raising rates to a restrictive level and won't be pivoting to a rate-cut cycle anytime soon. 

US core durable goods order print came at 0.3% versus 0.2% expected, suggesting the US economy remained relatively strong during the month of July. US second-quarter GDP, and weekly jobless claims, tomorrow, should prove a greater significance. On a technical picture, the near-term trend for the S&P 500 is still bearish, but the level of around 4'100 could act as daily support, although it could be briefly violated by a small amount.  

Stocks are attempting to bounce higher after tumbling in the past few days. Flash PMIs for the Eurozone and Germany was not as bad as feared and this morning's earnings in the US are surprising with upside revision. Investors remained laser-focused (and super worried) about yields and the dollar strength, thinking that this Friday's Jackson Hole could drive markets lower. However, the amount of fear in the market increasingly appears misplaced and overdone. Later the US PMI data could also give more clues about the economic momentum. One data point worth pointing out is the significant bearing positioning, as presented in the chart below, leaving room for markets reversal higher.