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Glass half full call on S&P 500 yesterday was vindicated – this yet another reversal has the power to go on, and credit markets appear sniffing out the upcoming reprieve. While rates have justifiably risen, they have done so quite fast in Jan – time to calm down and reprice the excessively hawkish Fed fears. Even if it was just energy and financials that rose yesterday, the table is set for gains across many assets – just check the progress from yesterday‘s already optimistic upturn, or the already fine early view of yesterday‘s market internals.
VIX is calming down, Fed is unlikely to rock the boat too much – such were my yesterday‘s thoughts about:
(…) seeing a rebound on Wednesday‘s FOMC (I‘m leaning towards its message being positively received, and no rate hike now as that‘s apart from the Eastern Europe situation the other fear around).
The sizable open profits – whether in S&P 500 or crude oil – can keep on growing while gold slowly approaches $1,870 again (look for a good day today), and copper stabilizes above $4.50 to keep pushing higher even if not yet outperforming other commodities. More dry firepowder and fresh profits ahead anywhere I look – even cryptos are to enjoy the unfolding risk-on upswing.
Let‘s move right into the charts (all courtesy of www.stockcharts.com).
S&P 500 and Nasdaq Outlook
This is what a tradable S&P 500 bottom looks like – just as it was most likely to turn out. After the 200-day moving average, 4,500 point of control is the next target.
Credit Markets
HYG reversed, but isn‘t in an uptrend yet – this is how a budding reversal looks like, especially since the selling hasn‘t picked up ahead of the Fed. Turning already.
Gold, Silver and Miners
Gold and silver pause was barely noticeable – it‘s a great sight of upcoming strength in the metals while miners unfortunately would continue underperforming to a degree, i.e. not leading decisively.
Crude Oil
Crude oil bulls are back, how did you like the pause? The ride higher isn‘t over by a long shot, and I like the volume of late being this much aligned.
Copper
Copper looks to be catching breath before another (modest but still) upswing. The buyers aren‘t yet rushing headlong.
Bitcoin and Ethereum
Bitcoin and Ethereum reversed, and are participating in the risk-on upturn, with Ethereum sending out quite nice short-term signs. From the overall portfolio view and upcoming volatility though, I would prefer to wait before making any move here.
Summary
S&P 500 bulls withstood yesterday‘s test, and are well positioned to extend gains, especially on the upcoming well received FOMC statement and soothing press conference. It had also turned out that a tech upswing is more likely to be continued today than yesterday – the Fed‘s words would calm down bonds, and that would enable a better Nasdaq upswing.
As I wrote yesterday, the table is set for an upside FOMC surprise – the tantrum coupled with war fears bidding up the dollar, is impossible to miss. Best places to be in remain commodities and precious metals – and I would add today once again in a while that real assets upswing would coincide with the dollar moving lower later today (check those upper knots of late). So far so good in risk-on, inflation trades – and things will get even better as my regular readers know (I can‘t underline how much you can benefit from regularly reading the full analyses as these are about how I arrive at the profitable conclusions presented & how you can twist them to your own purposes).
Related: "We’re In An Epic Bubble"