BOB LANG: Good morning, Action Alerts Plus subscribers. It's Tuesday, October 11, 2022. Time for our rundown. Lots to cover again today, so let's get to it.

So we're going to talk about the markets with breadth and volatility today. And we've seen some really horrible breadth over the last couple of days. Markets have been down. They tried to go up a little bit yesterday but failed miserably. This morning, before the markets were open, we tried to get a little bit of a rally going as well too, wiping away some of those losses from overnight. But that didn't work well either.

Meanwhile, volatility remains on the rise. The VIX is rising up again another 4.5% this morning. It was up a little bit yesterday. And interestingly enough, we just really haven't seen that big fear of panic coming into the markets, which we normally expect when the market sell off or, say, capitulate. But it still seems like bulls are hanging on here. And as long as that happens, there are lower prices ahead. We'll talk about those in just a couple of minutes.

So what does rising volatility mean? Basically, it means that ranges are expanding. And like yesterday, we had a very wide range of about almost 70 points on the S&P 500. With the VIX at about 32% or 33%, it means that daily moves are being priced in at about 2%. So 2% of 33,500 is about 70 points every single day. So we could see a 70 handle move on the markets today.

We've already been down about 41 or 42 handles. We could make another run up of about 30 handles, and there's your 70-point move. That is not a healthy condition for the market. People really are not acclimated to that sort of movement. It's like being on a roller coaster ride. So people tend to get nervous and scared and worried and fearful of that type of an environment that we're in right now. But it is what it is because liquidity is pretty bad. And the markets are adjusting to higher interest rates down the road.

Recently, breadth, as I mentioned, has been atrocious. Big institutional sellers remain active selling stocks. And the oscillators, which is something that I follow-- we talked about it on my call yesterday with Chris in the podcast-- oscillators remain fairly oversold here right now, not to an extreme level. So it means that there could be some more downside for the markets.

They're not that extreme right now, but they could reach that possibly by Thursday or Friday. So at that point in time, you could be looking at a relief rally. It's not something I would want to buy into, but more likely something that if we had some stocks that we had some gains in, or if you did, that you might want to use that opportunity to do some selling.

We've been eyeing this level, about 3,600, for a while. And talking about that, it was breached again today. It was breached for a little bit yesterday. We closed above 3,600 on the close. But today, we've breached it, and we're trading well below it. And again, that's going to be a huge resistance level. And people are going to be starting to sell as we approach that 3,600 level.

And, of course, as moving averages start coming down and penetrate that 3,600 level-- we're talking about the 20- and the 10-day moving average-- that's going to be even more severe resistance going forward. Below there, we have the 3,500 level, and then beyond that, the pre-COVID highs, which come in at about 3,393 on the S&P 500.

So let's talk about support with the S&P 500 versus the cash, S&P futures versus the cash. Now, as many of you know, the S&P futures trade almost continually. They trade overnight. And for instance, last night, we did see a low of about-- the S&P futures were down about minus 41 or 42, and we hit 3,584 on the futures. Now, we don't often see that the futures market is so much different than the cash market unless we have a lot of volatility in the markets, which, of course, we do right now with the VIX being at 32%, 33%.

So we may not visit those levels of the futures market during the cash open, which, of course, cash open is between 9:30 in the morning Eastern time and 4:00 PM Eastern time. We have 6 and 1/2 hours of trading the S&P cash. So we may not get those two matching up or even coinciding every day or even during the week.

However, we do have to recognize that there are levels that professional traders and investors are using to buy and sell. And the futures market is a great indicator to tell us those levels. So we have to respect those levels, even if we don't touch those levels during the regular trading day. So I hope that didn't confuse you here, but just be on the lookout for discrepancies between the VIX futures-- the S&P futures and the S&P cash. So for instance, today, we did see a test of those S&P futures when it appeared, really, right near the open, that we were going to go untouched. So keep those in mind.

And finally, tomorrow brings us earnings from Pepsi, which is the name that's in our Action Alerts Plus Portfolio, and the all-important PPI report, which is going to come in before the open. Last month, we had a slight negative on that, minus 0.1%, and the markets rallied a little bit on it but ended up losing a little bit of steam towards the end of the day.

Tomorrow, we're looking at, I think, a rise of about 0.2 or 0.3 on the PPI. And then, of course, the big one is on Thursday morning, which is the CPI number. And many are expecting that number to be moderately hot. It's the October number that we talked about recently that looks to be a much even hotter number than September.

Both numbers, of course, PPI and the CPI, will be key drivers of the market action, especially for bonds and the Fed funds futures. And I recently looked at the Fed funds futures coming up for the next meeting in November, and it's about an 80% chance of a 75-basis-point rate hike next month. So buckle up. It's going to be a bumpy ride into Halloween and just a little bit beyond that.

Of course, we do have the elections coming up in about a month, and that's going to steer some interesting conversation about what Fed policy should be like and inflation and that sort of stuff. But we're going to keep our eyes focused on the road and what's in front of us and trade and invest accordingly. So that's going to be it, and we'll wrap it up. Have a great day, everyone, and I'll see you tomorrow on Wednesday.