Market Overview: Four Down, One Up
This was a week where the macro environment did most of the talking, and it wasn't saying anything bullish. The ES/MES opened around 7782 Monday morning and worked its way down to a weekly low of 7651.0 by Thursday — a four-day grind lower that had real fundamental fuel behind it.
U.S. markets were closed Monday for the Labor Day holiday, so Tuesday was the real open for the week, and it was ugly right out of the gate. Stocks dropped as oil prices continued to rise, with the Dow tumbling over 600 points. On the MES, Tuesday's session confirmed the setup — we opened at 7780, briefly tested 7784.25 (which became the week's high), and then rolled over hard, closing at 7747.25 for a -32.8 point session. That failed push above Monday's high was a tell. When buyers couldn't even hold that narrow range, the path of least resistance was clear.
Stocks came under pressure as oil prices continued to rise — WTI climbed for a sixth straight day. Tensions in the Middle East were escalating, with Houthi forces seizing Yemen's strategic port city of Mocha, raising fears over shipping through the Bab el-Mandeb Strait. That geopolitical backdrop kept risk appetite suppressed throughout the early part of the week.
Wednesday continued the bleed. MES opened at 7727.75, chopped in a tight range at the open, and then broke to a session low of 7695.0, closing at 7709.25 — down another 18.5 points. We were now trading well below Tuesday's close, and the momentum was clearly one-directional.
Thursday was the capitulation low. The S&P 500 dropped below its 50-day moving average Thursday for the first time since late July. On the MES, we gapped down to open at 7663, hit the week's low of 7651.0, and then — finally — found some buyers. Thursday was the only green day of the week, closing at 7665.0 for a modest +2.0 point gain. Not a rip, but it stopped the bleeding.
Friday was the reversal session. The August CPI report showed headline CPI rising 0.4% as expected, while core CPI advanced 0.3%, above the 0.2% consensus. Money markets moved to price a September Fed hike as an almost done deal after the CPI print, but equity buyers stepped in to halt the four-day losing streak. MES gapped up to open at 7732, ran to a session high of 7749.75, and managed to close at 7731.25 — essentially flat, down just -0.8 points. Not a strong close, but enough to recover the week off the lows.
The weekly range was 133.25 points (7651.0 to 7796.0 on a tick basis), which is a meaningful expansion of volatility. The VIX confirmed it — the S&P 500 cash index fell about 0.79% on the week, but the real story was the 10-year Treasury yield pushing to 4.97% by Friday's close, up 3.78% on the week. Rates moving like that while equities are already under geopolitical pressure is not a healthy combination.