Overnight, UBS' Drew Matus - who still expects a September rate hike - writes that while "domestic momentum seems strong enough to support the beginnings of policy normalization with a rate hike in September" and that "the FOMC's central tendency projections for domestic activity are generally being met", cautions that "foreign strains and their spillover into financial markets have lessened the likelihood of that hike."
No surprises there, as this was merely a confirmation of what Bill Dudley said three days ago when he said a "September rate hike is less compelling" launching the biggest two day market move in history, even though counterintuitively what Dudley said was that there will be no rate hike as long as stocks are down. Stocks reacted by soaring, thus making September "compelling" once again.
Here is UBS' rate-hike checklist.
So focusing on the red checkmark, here is what UBS' 5 day average looked like as of yesterday.
Here's the problem: as of this moment - not averaged - financial conditions, thanks in no small part to the epic Chinese stock market intervention, the rumored BOJ intervention in the USDJPY which has sent the Dow Jones soaring the most in the past two days in history, and thanks to the biggest short squeeze, are once again in the green.
Which means that the relief rally from the market drop that resulted over fears of a Fed rate hike, has pushed financial conditions back to a level which allows the Fed to hike again, which in turn means the market can drop again having risen enough to allow the Fed to do what it has done.
This, as the algos would call it, is a closed loop, and is certain to overheat the Gallium Arsenide semiconductors at one or more New Jersey data centers for the second day in a row. Whether the biggest market dark pools will again close as a result of an air conditioner malfunction and thus hinder the proper functioning of the "market" remains to be seen.