The SPX closed 0.2 percent higher after a V-shaped intraday recovery.
While the sell-off was dominated by growth concerns the reversal was based on the same idea, but with the connotation of bad-news-is-good-news, as rate hike expectations came back significantly (see chart below).
Recession fears were also expressed by rates (10-year yields closed about nine basis points lower at 2.833 percent), energy (crude oil dropped below 100 dollars) and the dollar index (which popped to the highest level since 02).
SPX put activity was again below trend - a phenomenon that persists since June 20, while the Skew index (see chart below) declined to the lowest level since May 17, which is suggesting low demand for black swan protection.
Speaking of puts and whether they are underpriced or not.. The move index (see chart below), which measures bond market volatility, exploded higher today by 8.3 percent and has expanded to the highest level since2020. There is vol in bonds, will the VIX follow?
Tomorrow will bring German Factory Orders, Eurozone Retail Sales, UK’s construction PMI and from the US JOLTs plus the ISM Service PMI and we continue to expect a rather volatile day.