If you’re trying to understand why the market is going up this morning, good luck. Futures did move up a little after at 2 a.m. ET, which is when German Q2 GDP came out, slightly better than expected. China also announced a large stimulus program (1 trillion yuan) aimed largely at infrastructure. That’s as good an explanation as any. Fact is, three of the five lightest volume days of the year have occurred in the past week, so don’t strain too hard to explain why the market is up, or even why it was down so big on Monday. At the moment, there seems to be an upper limit to markets. All the bulls need is reassurance that the Fed will not continue with “pedal to the metal” tightening that is more aggressive than already expected. The market has already priced in that inflation has peaked but is only coming down slowly. Everyone is fixated on Jay Powell’s speech Friday, but the big news that day may be the personal consumption expenditure report, the Fed’s preferred tool for measuring inflation. The June print was 6.8% for year over year, and July is not expected to be much better, at 6.3%. Core PCE, which strips out food and gasoline, is expected to be up 4.7%, barely down from 4.8% in June. Core PCE month over month is not much better either: expected up 0.3%, from June’s 0.59%. That data may go a long way toward helping various Federal Reserve officials who are sitting on the fence decide if they will support a 50 or 75 basis point hike in rates at the next Fed meeting on Sept. 21. Kansas City Fed President Esther George , speaking with CNBC’s Steve Liesman this morning, declined to say whether she would support a 50 or 75 basis point hike but she said she would want to see “three consistent months of data” before she would be convinced inflation was starting to come off its highs. She also declined to say whether we were in a recession, but did note that: “What we see right now is that demand is cooling, and I am going to watch this data carefully to see how much it brings this imbalance back to something to get inflation [under control].” Federal Reserve Bank of Atlanta President Raphael Bostic, who is not a voting member currently, is also is a fence sitter, and he too noted that there are several employment and inflation reports before the next Fed meeting, and if the data remains strong, “then it may make a case for, you know, another 75 basis point move.” Can we bust out of the trading range? The S & P is flat in August, which is quite a miracle for the bulls. The bulls are basing the rally on the fact that the Fed is very cognizant of the slowdown they have already created, as George noted. The economy is just starting to feel the effects of moves that began in March. There is a big contingent in the Fed worried about too much damage to the economy, particularly with the Russian invasion of Ukraine and a big economic slowdown in China acting as wild cards in the global economy. “Those factors could actually accelerate our domestic slowdown in ways that also mean that we have to do less” with monetary policy tightening, Bostic said. What is not priced in is a continuation of “pedal to the metal.” Right now, the terminal rate for fed funds is 3.25% to 3.50% (currently 2.25% to 2.50%). If they go 75 basis points in September, the market will need to adjust to a slightly higher terminal rate. That may, or may not, tip us into recession.