Before the Open

The S&P 500 has already retraced 100% of its losses since the SVB crisis began. The Treasury market has only retraced 1/3 of its "flight to safety" move. Thus, there is a lot of complacency in the stock market right now.

The stock market is not looking past this crisis. It's being propped up by liquidity. Therefore, It’s looking over the rainbow…into a fantasy land…that is very unlikely to exist for very long.

The only reason the stock market rallied last week was because of an emergency injection of liquidity. If Chairman Powell does not indicate that a big new (sustained) liquidity program, the rally will fail.

A repeat of the banking crisis of 2008 is unlikely. However, given that a recession is now much more likely...and earnings forecasts will have to come down...today's expensive stock market will have to fall further.

First the bond market, now the oil market. SOME markets ARE starting to price-in a recession. However, the stock market is still WAY too overvalued to say the same thing about the equity market. (This is especially true given that earnings estimates are going to come down much more quickly now.)