Morning Notes — Catalysts Ahead

The S&P 500 continues to trade in the 4,100-4,300 support range as realized volatility slowly descends from recent highs.  Geopolitical risks are holding the index in this range, while bullish technical signals, light positioning and extreme bearish sentiment result in a favorable risk/reward set-up. The ~12% correction in January matches the magnitude of the four prior episodes preceding a Fed rate hike cycle. Developments in Ukraine have generated higher levels of realized volatility, but an unknown policy outcome is responsible for most of the uncertainty discount currently priced into equity markets. Markets prefer any certainty over uncertainty, making next Wednesday’s Fed meeting the most important scheduled catalyst ahead. The S&P 500 Value Index (SVX) is still our preferred place to shop when it’s time to add equity exposure.