Market Journal: Mid-Day Update
Soft landing bullishness is manifesting itself in market structure.
Discussion
Market conditions sort of leaned bearish this morning at a sector level with defensives leading and VVIX sticky, but HY CDX wasn’t buying it; and sure enough, over the last couple of hours market structure has turned bullish with XLU, VVIX, and HY CDX all turning lower. Overall, breadth is strong, too, led by economically sensitive issues.
Underpinning all of this is rate cut pricing starting in March. Until inflation surprises to the upside or the labor market to the downside, or positioning becomes extremely unbalanced (we’ll keep a close ear to the ground for Cem Karsan commentary on this front), the soft landing narrative will continue to drive the market higher, at least through next week’s FOMC.