Pausing Stocks and Gold Fireworks / Commodities / Gold and Silver 2021
The S&P 500 went back to relentless rallying onFriday, yet the selling wave before the close looks to indicate hesitationahead. Even though VIX is attacking the 16 level, and the put/call ratio tickedhigher, the bulls are little disturbed thus far – and they‘re unlikely to getupset. Whatever consolidation comes, would be a sideways one – one to bebought.
That‘s the result of ample liquidity in the system, whichis denting the rotations. Yields can go up or down, yet the sectoraladjustments to the downside aren‘t largely there, and that extends beyond therecently discussed financials. Itconcerns tech specifically, as the sector appears at a turning point – itdefended gains:
(…) without too much help from the behemoths, and valuestocks surged. …. Retail sales outdoing expectations and unemployment claimsdropping sharply – the economic recovery is doing fine, manufacturing expands,and inflation doesn‘t yet bite. We‘re still in the reflationary stage where economicgrowth is higher than the rate of inflation or its expectations.
Gold loved the TLT upswing and Powell‘s assurances aboutnot selling bonds back into the market in rememberance of eating a humble pieafter the Dec 2018 hissy fit in the stock market (isn‘t this the third mandateactually, the cynics might ask). I called for the sharp gains across theprecious metals board sending my open position(s) even more into the black.
Miners keep supporting the upswing in both metals, andthe technical picture has turned, reflecting the economic realities andcommodities‘ run anounced on Wednesday. Now, it‘sup to gold and silver to catch up on what they missed since the early Aug 2020.Inflation is running hotter, and the Fed is tolerant of it, amply supplyingliquidity. The gold bottom is in, and much brighter days ahead.
Let‘s move right into the charts (all courtesy of www.stockcharts.com).
S&P 500 Outlook
New ATHs, again and this time on rising volume – themomentum still largely remains with the bulls in spite of the late day sellingpressure, and as said earlier, $NYFANG causing a few short-term wrinkles.
Credit Markets
Both high yield corporate bonds (HYG ETF) and investmentgrade ones (LQD ETF) have weakened, driven by the TLT retreat. This is abearish omen unless the bulls step in, which could take a while.
Technology and Value
Reflecting the decline in long-dated Treasuries, techwavered while its big names declined, and it was up to value stocks to save theday.
Gold in the Limelight
The gold sector is running, and miners show no signs ofstopping their solid outperformance of the yellow metal. These two have risenon Friday in spite of TLT turning lower again – the decoupling from nominalyields is getting more pronounced.
The miners to gold ratio is as well pointing higher, andthe higher low it made at the end of March, speaks volumes. The pressure is togo higher as the next precious metals upleg unfolds.
Miners in Focus
Gold seniors (GDX ETF) are matched in strength by silverminers (SIL ETF), and have convincingly broken above their recent highs and thedeclining resistance line connecting November and January tops. The unavoidableinflation data bringing down real rates are at work, and silver can be onceagain expected to start doing better than gold soon, and to considerablyincrease the open profits.
Summary
The daily S&P 500consolidation looms, but will be a buying opportunity – not a sign of a markettop. If you disliked the staircase climb for offering precious fewopportunities to join without a discounted entry, your time is approaching.
Gold and miners keep surging as the commoditiessignposted, little hampered by the daily increase in nominal yields. Patiencehas been rewarded, and as we closed above $1,775, the gold bottom can bedeclared as in.
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Thank you,
MonicaKingsley
Stock Trading Signals
Gold Trading Signals
www.monicakingsley.co
mk@monicakingsley.co
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