Morning Notes — Uncertainty into Catalysts

Today’s downtick in risk assets mostly reflects an uncertainty discount into tomorrow’s April Jobs Report and next Wednesday’s CPI print.  Fed policy is always data dependent, but Powell’s comments yesterday underscored the importance of near-term inflation data. When answering a follow up question to his remark about a possible peak in core CPI, Powel said more evidence is needed “but again, it is not like we would stop. We would just go back to 25 basis point increases.”   

Equity sentiment is at record bearish extremes and nearly every positioning indicator remains in the bottom quartile/decile. Sentiment and positioning are highly reliable contrarian indicators with imprecise timing characteristics.  Earlier this week, the S&P 500 (SPX) bullishly reversed from anticipated range support at ~4100 with momentum divergence signals that many systematic funds use as buying triggers.