S&P 500 uphill battle
S&P 500 bulls missed a good opportunity, and creditmarkets close doesn't add to bullish sentiment. High yield corporate bonds ledthe selling in what turned out a strong risk-off day in debt. Light volume,holiday days often don't end up on a weak note, which highlights the challengesthe bulls are faced with. Yes, today's overnight upswing will likely gettested.
Sure, credit market could take the reprieve I was lookingfor instead of yesterday, today. Would stocks enthusiastically follow through?Value had great trouble yesterday even when faced with rising yields. Allthat's necessary is a spark, and tomorrow's CPI is likely to deliver that. I'mlooking for a reasonably hot number that wouldn't show the massaged figure's furtherdeceleration. Talking numbers powerful enough to make the Fed move - and moreimportantly to make the markets force the Fed to move - I asked yesterday whetherthere are:
(...) creepingworries about Fed policy mistake in letting inflation become an even biggerproblem than it is already? Not that it's not set to become one - even the lazyand slow PCE deflator has scored a jump not seen in decades.
For perspective, wholesale prices in Germany just jumpedover 13% year on year. The increasing doubts would be seen in the pressure onUSD - the dollar looks set to swing lower next. Not breaking down, butgradually trending lower. It's telling that not even higher yields could powerit up over the past week. Whatever the chart pattern it's in, the inflationexpectations dynamics is likely to catch up with it as real rates will havetrouble keeping up. And that's a boon in this war of attrition, in this waitinggame in precious metals.
Meanwhile, commodities aren't hesitating, and the shallowintraday oil declines are promptly being bought up. Faced with slowing realeconomy, even copper is waking up after a long slumber. Bitcoin is around 15%off its all time high. What else to add?
Let's move right into the charts (all courtesy of www.stockcharts.com).
S&P 500 and Nasdaq Outlook
S&P 500 reversed on solid volume - not outstandingone, but good enough to leave the medium-term advantage with the bears.
Credit Markets
HYG kept plummeting as the session drew to its close, andthe credit markets assessment for this week, isn't a positive one.
Gold, Silver and Miners
Precious metals didn't send bullish signals yesterday,but the fireworks can be expected tomorrow. All it takes is a few Fed speakersunderplaying the evolution of inflation.
Crude Oil
Crude oil retreated from $82, yet remains perched above$80. Its trading range is likely to remain quite narrow, and a sidewaysconsolidation (consolidation in time) shouldn't be surprising.
Copper
Copper finally having comealive, is a good sign for precious metals as well. It's an encouraging sign ofdaily outperformance.
Bitcoin and Ethereum
Bitcoin is rising while Ethereum pauses - the dailyindicators are vulnerable to a consolidation, but overall, the path of leastresistance is still up.
Summary
Stock market rebound will likely run out of steam, andconsolidate before the next major move. Odds are that the bears aren't done yet- as I often say, it's the bond markets that usually have it right, and stocksare more often than not catching up with being on the wrong side. Despiteseasonal tendencies to appreciate now, the focus is rightfully on Fed'sinflation brinkmanship. I view this as Treasuries making the move withoutwaiting for the Fed's blessing. Real assets and cryptos stand to benefit asinflation expectations keep trending up.
Thank youfor having read today's free analysis, which is available in full at myhomesite. There, you can subscribe to the free Monica'sInsider Club , which features real-timetrade calls and intraday updates for all the five publications: Stock TradingSignals, Gold Trading Signals, Oil Trading Signals, Copper Trading Signals andBitcoin Trading Signals.
Thank you,
By Monica KingsleyContributing tokitco.com
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