Situation Awareness: Cautious Bearish. The tape enters Friday bruised — three straight down sessions driven by an oil surge (WTI above $102 yesterday) and relentlessly rising yields, but futures are catching a bid this morning as crude reverses hard, down 3.2% to $99.24 on reports Gulf states will meet Iran Monday to defuse Strait of Hormuz tensions. The whole session pivots on the 8:30 ET August CPI print (consensus 0.4%, prior 0.1%) — the deciding input for a September 16 FOMC where FedWatch now prices a 69.4% chance of a 25bp HIKE. Index levels are data-unavailable this morning, so lean on futures: S&P +42 @ 7,640, Nasdaq +195 @ 29,330, Dow +286 @ 52,381. Trade mode: selective and defensive into the number, let the print resolve before committing. Regime context — 34.04% of stocks trade above their 40-day SMA (down from 38.26%), and the 4% Bull/Bear gauge shows 91 bulls vs. 277 bears. The 5-day trend shows a consistent down sequence, confirming downward momentum even as futures bounce.
SIP: COO AEO AVAV DBI
- What’s working: Continuation/2LYNCH scan is moderately full with 10 signals; Delayed 9M and Reversal scans are both empty — a defensive breadth read.
- Leading sectors: market closed — no live sector or theme data; ATR volatility feed is empty. Breadth internals are doing the talking, and they lean bearish.
- Key event: August CPI at 8:30 ET is the week’s marquee catalyst ahead of next Tuesday’s FOMC decision.
- Market read: yesterday closed lower for a third straight session (S&P -0.6%, Nasdaq -0.7%, Russell -1.0%) on oil and yields; today’s bounce is oil-relief driven, not conviction — fragile until CPI clears.
- DEP watchlist: no Delayed 9M signals today — scan is dry, respect the lack of setups.
- SIPS: APP, RDDT, AAPL from the Continuation scan.
Today’s Market Narrative
After three consecutive losing sessions, equity futures are pointing decisively higher this morning — S&P futures +42 at 7,640, Nasdaq futures +195 at 29,330, and Dow futures +286 at 52,381. The catalyst is singular and clear: oil is finally breaking its brutal weekly rally. WTI crude is down $3.24 (-3.2%) to $99.24 after a Financial Times report that neighboring Gulf states will sit down with Iran on Monday to ease hostilities around the Strait of Hormuz. That’s the first real off-ramp the market has seen in a week where crude tacked on roughly 11.5% and settled above $102 yesterday.
But make no mistake — this is a relief bounce inside a downtrend, not a trend change. The internals remain heavy. Only 34% of stocks sit above their 40-day SMA, down more than four points from the prior session, and the 20-day breadth reading collapsed from 58% to 31% in a single day. The 4% breakdown count of 277 dwarfs the 91 breakouts. Yesterday’s close saw nine of eleven S&P sectors finish red, with materials (-1.5%) at the bottom on copper weakness and info tech (-0.9%) dragging via a 2.7% drop in the PHLX Semiconductor Index. NVIDIA shed 2.36% to $218.40; even TSM fell 1.62% despite a 53.3% jump in August revenue.
The real story hits at 8:30 ET. August CPI is universally viewed as the swing factor for the FOMC, and this is a Fed that’s debating a HIKE, not a cut — an unusual regime worth internalizing. Yesterday’s PPI did nothing to cool those fears: headline PPI rose 0.4% month-over-month with upward July revisions, and year-over-year producer inflation accelerated to 5.4%. That pushed the FedWatch hike probability to 73.1% intraday, settling near 69.4% this morning. A hot CPI likely cements the hike and pressures rate-sensitive growth; a soft print buys the doves room.
Overseas offered a mixed backdrop. Asia closed the week lower on speculation the Bank of Japan could accelerate rate hikes — Nikkei -1.9%, Kospi -1.8%, Shanghai -1.2%. Europe, though, is green (STOXX 600 +0.6%, DAX +0.5%), riding the same oil relief even as ECB policymakers flag persistent inflation and stoke talk of another October hike. The global rate narrative is uniformly hawkish right now, and that’s the ceiling on any equity rebound.
Macro & Policy
This is the defining tension: new Fed Chair Kevin Warsh has stripped away forward guidance and effectively told the market to think for itself. Per the Big Picture, if CPI pushes the September hike probability decisively above 60% — and it’s already at 69.4% — the burden shifts to the Fed to justify standing pat. Three officials dissented at the last meeting in favor of a hike (Hammack, Kashkari, Logan), and with oil higher, ISM services prices-paid at multi-year highs, and PCE still north of target, the hawkish camp has ammunition. Warsh’s own credibility, given his repeated criticism of “65 months of sustained, elevated inflation,” makes a hold hard to defend if the data cooperates with the hawks.
The bond market is bracing accordingly. Treasuries are set for a slightly lower start in shorter tenors ahead of CPI. The 2-year sits at 4.57% (+2bp), the 5-year at 4.74%, and the 10-year at 4.95% (+1bp) — just below its 2023 peak near 4.997%. The 30-year at 5.36% is hovering near its highest since 2007. Yields have printed fresh 2026 highs across the curve this week, and until that pressure abates, any equity rally is fighting a stiff headwind. The U.S. Dollar Index is firm at 99.14.
Geopolitically, the Iran de-escalation headline is doing real work this morning, but it’s diplomacy-by-report, not resolution — the DOJ is also probing NVIDIA’s Groq deal, and the EC approved €6.1 billion for Ukraine defense. Currencies are quiet: EUR/USD 1.1592, USD/JPY 153.99 (yen firmer on BoJ hawkishness), GBP/USD 1.3504. Gold is down 0.7% to $4,377 and copper off slightly at $6.535 — the risk-relief trade favoring equities over metals this morning.
Economic Calendar Today
- 8:30 AM ET — August CPI: Consensus 0.4% | Prior 0.1%. Core CPI consensus 0.2% | Prior 0.2%. The single most important release of the week; directly sets the odds for a September 16 rate hike. A print at or above 0.4% likely locks in the hike and pressures duration and growth names.
- 10:00 AM ET — Univ. of Michigan Consumer Sentiment (Prelim, Sep): Consensus 51.5 | Prior 51.7. Watch the inflation-expectations component more than the headline.
- 2:00 PM ET — August Treasury Budget: Consensus -$485.0B | Prior -$432.3B. Deficit trajectory matters given elevated long-end yields and fresh fiscal-spending chatter.
- Earnings pre-market: Kroger (KR) — beat by $0.03, revs in-line, reaffirmed FY27 EPS guidance. Otherwise a light Friday slate after a heavy week.
Earnings & Corporate News
Oracle (ORCL 162.01, +8.84, +5.77%) is the standout, gapping ~7% pre-market after beating by $0.18 with total cloud revenue up 62% and an above-consensus FY27 EPS outlook — validation of the AI-infrastructure buildout thesis. The other side of the AI-monetization coin: Adobe (ADBE) is down ~3.8% despite a modest Q3 beat and in-line Q4 guidance, as the market wants proof it can convert AI engagement into paid recurring revenue. Copart (CPRT 32.55, +5.85%) missed by $0.03 but is rising on its $10.50/share cash deal for ACV Auctions (ACVA +44%) — a clean M&A pop worth noting.
The retail/apparel complex remains a landmine. American Eagle (AEO 14.52) cratered ~13.9% yesterday on soft American Eagle brand results, dragging peers; Zumiez (ZUMZ) is gapping down 16.3% pre-market after missing on both lines. Cooper Companies (COO 54.17) plunged 14.67% on a Q3 revenue miss and downside Q4 guidance tied to CooperVision destocking. On the winners’ side, RH beat by $2.32 and is up ~8.2%, and Designer Brands (DBI) flagged a strong beat with raised guidance in the SIP feed.
On ratings, the cybersecurity group took broad Wedbush downgrades — CHKP, DT, FTNT, QLYS, TENB, TLS, VRNS all cut to Neutral/Underperform, a notable sector-level derating. Novo Nordisk (NVO) was cut to Underweight at Morgan Stanley (tgt $40), and NuScale (SMR) to Sell at UBS. Bright spots: International Paper (IP) upgraded to Buy at BofA, and fresh Outperform initiations on Rocket Lab (RKLB, tgt $80) and Dell (DELL, tgt $640).
WaveFinder Signal Summary
The scan environment is defensive-leaning. The Continuation/2LYNCH scan carries 10 signals — enough to trade but not a broad-breadth green light — while both the Delayed 9M and Reversal scans are completely empty. That combination, paired with 40-day breadth contracting to 34% and the 20-day reading gapping down to 31%, tells you leadership is thinning fast. Top continuation setups worth watching: RDDT (+6.1%, riding yesterday’s 6% pop), AAPL (+3.6%, RVOL 1.7, showing a 2LYNCH continuation), and APP (+3.1%). ELV also flagged with elevated RVOL of 2.1 and a healthy medical-sector move. FCX (-6.6%) appears in the scan but as a breakdown — avoid chasing miners into copper weakness.
Net read: breadth is contracting, not expanding, three sessions running. Respect the lack of D9M and Reversal signals — the system is telling you this isn’t a market to force new longs into a binary CPI event.
Today’s Watchlist
- ORCL — Cloud revenue +62%, gapping ~7% to $162; AI-infrastructure leader confirming the buildout thesis. Watch for follow-through above the gap.
- AAPL — 2LYNCH continuation setup, +3.6% at $326.57 on RVOL 1.7; a relative-strength anchor if the tape holds post-CPI.
- RDDT — Continuation signal, +6.1% at $155.34 after leading the S&P yesterday; momentum name to monitor into strength.
- ADBE — Down ~3.8% on AI-monetization doubts despite a beat; watch whether it stabilizes or leads software lower.
- NVDA — $218.40 after a 2.36% drop, now with a DOJ Groq-deal probe overhang; the semis’ tell for risk appetite.
- CPRT / ACVA — Clean M&A: CPRT buying ACV at $10.50/share cash; ACVA +44%, CPRT +5.7%.
Action Codes of the Day
- FHP (First Hour Pass) — With August CPI dropping at 8:30 ET and a 69.4% hike probability hanging on it, let the market show its hand; the print, not the pre-market oil bounce, sets the day’s direction.
- COUGAR (Patience play) — Breadth at 34% above the 40-SMA, down three straight sessions, with empty D9M and Reversal scans — wait for the right pitch rather than forcing longs into a binary event.