Conflicting economic data this week only added to the general confused, unstable direction of markets.

The ISM Services PMI came in over expectations, increasing month-to-month, and in expansionary territory. The ISM Manufacturing PMI also came in over expectations staying flat in August.

• Neither index is indicating recession and both continue to show steadily falling prices (good news for inflation).

Regardless, the Fed has made clear that further rate hikes are a certainty. The questions facing investors now are:

Will the Fed break something in its quest to quash inflation?

If it does, what will it break?

• Look for deterioration in the housing market (definitely in a correction; still a ways to go to get back to normal), labor market (showing significant strength; few signs of loosening), broad economic demand (GDP), or the stock market (lower lows; lower multiples).

Is a soft landing possible?

• Again the labor market is showing continued strength (jobless claims have fallen for 4 straight weeks; see also increased participation numbers from last week’s Talking Points), and manufacturing and services indexes continue to show expansionary levels with falling prices.

Stocks remain under pressure.

The S&P 500 remains down -17% from its peak.

• The index has traded below its 200-day moving average for over 100 trade days. This is the longest streak since the Great Financial Crisis (2009).

The Nasdaq remains down -26% from its peak.

• Like the S&P, the Nasdaq has traded below its 200-day moving average for over 100 trade days; also the index’s longest streak since 2009.