Don't expect the S&P 500 to make much progress with rates this high

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A trader works on the floor of the New York Stock Exchange (NYSE) in New York City, August 29, 2022.

Brendan McDermid | Reuters

This is the daily notebook of Mike Santoli, CNBC’s senior markets commentator, with ideas about trends, stocks and market statistics.

  • An oversold U.S. market is trying to come to grips with three days of challenging but not wholly surprising macro headlines, leaving the indexes whippy around the 3,900 level of the S&P 500.
  • European energy scarcity/runaway power costs are mostly manifest in depleted global-growth expectations and an unrelenting (so far) surge in the dollar. But oil/gas prices are sort of selling the news and the macro message does little to undermine the idea of relative U.S. economic resilience set by Friday’s jobs numbers and today’s ISM services gauge.
  • The key short-term task for the tape is to respond to some significant oversold conditions (very low percentage of stocks above a 10-day average, etc.) after three straight down weeks and a 1.5% afternoon drop on Friday. The S&P 500 has spent very little time under 3,900 (or over 4,200) the past four months, with the dive toward 3,600 representing peak stagflation panic and the ramp to 4,300 into mid-August animated by a powerful oversold rally and some “Federal Reserve pivot” expectations taking hold.
  • The “don’t overthink it” take on the market remains a cautious one: Stocks are in a well-defined downtrend. They failed exactly at the declining 200-day average. The Fed is tightening into a slowdown (or worse) and might go until something ruptures. The European Central Bank is hiking into a recession. September is historically ungenerous. Further, if you think Fed balance sheet reduction is a real-world threat (vs. my take that it’s largely irrelevant), it accelerates this month.