March 3, 2022
The S&P 500 (SPX) has recovered +7% from the intraday low on 2/24 as momentum divergences triggered short covering and option dealer gamma hedging. Yesterday’s strong advance followed incremental clarity on Fed policy, while equity market volatility remains dependent on Russia/Ukraine headlines. The move higher in in crude oil prices has been orderly and somewhat encouraging, but levels above $130-$150bbl would begin to create a challenge for markets. Yesterday’s notes outlined our expectation for oil prices to stay elevated regardless of any potential ceasefire/resolution, and any pullback in crude prices should first be considered an opportunity to add Energy exposure.