Yo Pit Crazies,

Bond prices are hanging on for the moment. The job numbers came in a little light, and I think they'd look better if we kept cutting SNAP benefits. The program was $60 billion in 2019 and $127 billion today.

With unemployment back near 4 percent, that seems a little ridiculous. That's the issue we're still having. Federal transfers to states are historic.

My question is why, and why can't Congress fix it. Well, it's an election year and they don't want to.

I'm seeing more talk about raising the Social Security age. There are easy fixes for that. Congress doesn't want to do anything.

Enter Fed Chairman Warsh and a new NFP number (nonfarm payrolls, the government's monthly jobs count) coming Friday. The ADP came in light and gave Warsh some cover to leave rates alone. Friday might undo that.

Either way, Warsh has a tough road. He's the current bag holder as Fed Chair. The CME website puts a 64 percent chance on Fed funds going up to near 4 percent.

As Warsh said a couple of weeks ago, the bond market is doing the work for him, and he might have to raise to keep up. Congress could cut spending, put up some curbs, even pass a budget for the first time in 30 years. But Congress doesn't want to do anything.

Somebody Sold the Whole Vol Curve

My Skew-O-Later is available from Edge Hunter for folks who want to grab one. You need the LiveVol Excel data feed to make it work, but it's very cool for real-time skew (the price gap between downside puts and upside calls, which shows you where traders are paying up for protection).

Today's story from the get-go was lower volatility across the SPX volatility curve. The ADP data was good enough to lower the odds of a rate hike. We'll see by Friday.

SPX skew move in the Skew-O-Later, September 2 morning

In the SOTM today, Mark Sebastian mentioned 13 million barrels of oil ran the Strait of Hormuz on Monday. Twenty million is the pre-Iran conflict number. If that keeps climbing back toward 20 million, the USA reaches its objective.

That's another potential catalyst, and it could be a big one. A big piece of the inflation problem goes away with it. That's likely part of the volatility rout too.

Warsh and the VIX Land on the Same Wednesday

By some twist of fate, the Fed reports on rates the same Wednesday as VIX expiration. I don't know if that was by design or luck. It comes at an inconvenient time: the September VIX contract expires and October becomes the contract everyone trades.

I'm guessing this week is the low for VIX until the September 16 expiration. It sets up perfectly for my Two Way Trades.

VIX is sitting close to its lows because the S&P 500 is posting record profits. Look at Dell Technologies (DELL) today. VIX only gets to new lows if Iran settles, Congress stops spending, or the FOMC holds the rate line.

I'll leave it to you to decide which of those is most likely. What's more likely is that SPY moves more than we think, and that's the way to trade it.

Hopefully this was helpful,

Andrew