It was an implied volatility day, so it felt like it was ahead of Vixperation tomorrow morning. The important level for the VIX is 14, and as of today, the VIX closed at 13.8. Vixperiation officially isn’t until the morning, so the VIX may manage to climb back above 14, but there is clearly an A for effort here on the market’s part. 
(Bloomberg)
But while the VIX was falling, the VIX 1-day was rocketing higher ahead of tomorrow’s FOMC meeting, similar to what we saw ahead of the CPI report last week. The main difference is that it hasn’t gotten as high yet. It still has time to do that tomorrow since the press conference doesn’t start until 2:30 PM ET. So it would seem possible that tomorrow, between 2:35 and 2:45, we will see that volatility crush, which could send the equity market higher. It doesn’t mean the market will finish higher; it doesn’t mean it will finish lower. It just means that volatility needs to reset, and the higher the IV is when that Press Conference begins, the bigger the volatility crush; how long it lasts depends on the message from the Fed. 
In the meantime, if the Fed doesn’t push back tomorrow and show some effort, you really have to wonder what the Fed may be thinking about this point. I think it is the correct call to show fewer rate cuts at this point, given the hotter inflation readings we have seen and the hotter inflation reading we are expected to get, with swaps for March seeing CPI around 3.4% y/y, April around 3.2% y/y, and May around 3.2%. 
Of course, this assumes that things like gasoline do not keep rising. So far this month alone, the average price of gasoline is up more than 5%. 
So, the Fed can ignore the risk and not push back, or it can face a bigger problem. I would think it is time for them to step up after what we just went through in 2022.More By This Author:The Market Are A Critical Inflection Point Ahead Of Fed Meeting
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