A Hike Is Now The Base Case

A September hike is now the base case. Fed funds futures put it near 60%, up from a little over 40% in late August, and crude is doing that repricing, not any inflation print. Brent went through $101 this morning, its highest in over three months and up about 15% since the month began. Ten-year 4.85%, two-year 4.43%. SPX closed 7,636.36 yesterday, down 0.48%, the Dow off 405 points to 52,380.66. Premarket 7,637, flat.

Treasury buys back up to $6 billion of long-dated debt today, three times the usual operation. The August 19 announcement merely doubled it off $2 billion, and that bought exactly one session of lower yields before they went straight back up. This one lands on a ten-year already at its highest since late 2023, and the yield rose anyway. A buyback is the bid of last resort for the long end. When the long end will not take it at triple size, what is being priced is not a shortage of buyers.

Premarket sits three points under the flip at 7,640, which understates how fine the edge is. One positive strike at 7,635 is holding price up and it is the last one. From 7,630 down every strike is negative for thirty points into the put wall at 7,600, the heaviest node on the profile by a distance. Go the other way and 7,645 turns all of it: positive gamma runs unbroken from there into the 7,680 call wall, the largest positive of the day, with the 8-day at 7,681 and the 13-day at 7,683 on it. Wednesday closed under the 8-week EMA at 7,642, leaving the 50-day at 7,602 as the only moving average beneath the market.

The lean is short. Under 7,631 nothing structural stands for thirty points and every strike between is negative, so losing it travels rather than drifts. No long case exists until 7,645, where the profile turns positive, and price could not hold the 8-week three points below that. PPI at 8:30 moves it, with consensus looking for producer prices to accelerate to 5.1% from 4.7% before a barrel of this month's crude reaches the data. 7,600 is the first long worth taking.