Struck In The Strait

The US struck Iran inside the Strait of Hormuz. Two rocket launchers on Larak Island went Sunday, after Central Command said Revolutionary Guard forces were observed preparing to fire rockets carrying sea mines into the waterway, and Iran answered with ballistic missiles and drones aimed at American installations in Jordan. First exchange of fire in a month, and it lands on the one thread that had finally started to resolve: the strait has been shut since March 4, transits restarted last week, and crude spent the week falling on it. Brent is back above $90 and WTI above $85. Chicago PMI at 9:45 and the Dallas Fed survey at 10:30 are the only scheduled data. SPX closed 7,712 Friday, off 0.2%, with the Nasdaq down 0.7%. Premarket 7,693, down eighteen.

What moved Friday was the price of the tone, not the tone. Fed funds futures now put a September hike near 56%, against roughly 40% a week ago and about one in three in the middle of the month, so a market that spent all of August arguing the Fed was finished gave that position up inside a single session. Warsh supplied the reason. He called the labor market effectively fully employed and said financial conditions are not restraining the economy, which is the line that matters, because it turns a rising stock market into an argument for hiking rather than a reason to wait. Then crude gapped. For five weeks the pattern here was oil taking back every dovish repricing the tape managed to build; the last fortnight inverted it, with the sanctions package and the Hormuz reopening talks both pushing oil lower instead. Both legs turned back over the weekend, and they turned back together.

Premarket is twelve points under the flip at 7,705, the first open below it since Aug 24 and the end of a four-session run above. The heaviest negative anywhere near price sits overhead rather than underneath, seven points up at 7,700, with premarket balanced on a small positive pocket at 7,695 that has nothing behind it. Underneath, three consecutive strikes at 7,675, 7,680 and 7,685 carry the weight and begin eight points down, and the put wall at 7,650 supplies no shelf, because the negatives keep running well past it rather than stopping there. Overhead is the better half of this profile. The strikes above the call wall at 7,750 sum to roughly 5,831 against the wall's 2,203, about two and a half times, so clearing it pulls rather than caps — that sum-above test has now decided the read six sessions running without failing. VIX 15.28, up from 14.48 on Friday and back on its marked 15.29 after three straight events it declined to pay for.

The lean is short into strength while 7,705 caps, and 7,712 is the number that ends it. Reclaiming that takes back the gamma flip, Friday's close at 7,711.76 and the 20 SMA at 7,712.58 in one move, four pieces of structure inside eight points, and the profile above pulls toward the wall rather than fighting it. Losing 7,690 removes the 13 EMA, the last moving average holding underneath, and opens the cluster below. Rallies into 7,712 are for selling until it goes.