The market entered this morning's trading session with quite tense sentiment despite a slight recovery in last night's futures session, with most positions of CTAs (commodities trading advisors) and Quant Funds continuing to be short.
With forecast from GS showing large volatility in the market with amplitude >1 standard deviation fluctuation that could lead to more than $50 billion in selling flow from CTAs.
The above event partially occurred this morning. After Powell neither confirmed nor denied the rate hike next month, the market had a strong shorts-cover rally wave, largely based on the unexpected drop in volatility that crushed the amount of short-term puts in a low liquidity environment before long-term hedge demand returned to dominate the market.
