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S&P 500 Santa rally goes on, and risk-on markets rejoice. What a nice sight of market breadth improvement, and confirmation from bonds. Financials and industrials are lagging, but real estate, healthcare and tech are humming smoothly. As I told you yesterday about volatility:
(…) The VIX is calming down, now around 21 with further room to decline still – at least as far as the remainder of 2021 is concerned.
We got the lower values, and today is shaping up to look likewise constructively for the bulls across both paper and real assets. Yesterday‘s dollar decline has helped as much as well bid bonds. Inflation expectations aren‘t yet doubting the Fed, there is no more compressing the yield curve at the moment, so it‘s all quiet on the central bank front. That‘s good, the Santa rally can go on unimpeded.
Precious metals are peeking higher in what looks to be adjustment to the lower yields and dollar, and commodities upswing remains driven by energy, base metals and agrifoods. Cryptos hesitation may hint at slimmer gains today than was the case yesterday when instead of a brief consolidation, we were treated to improving returns.
Merry Christmas if you‘re celebrating – and if not, happy holidays spent with your closest ones. Let the festive season and message of the Prince of Peace permeate our hearts and inspire the best in mankind.
Let‘s move right into the charts (all courtesy of www.stockcharts.com).
S&P 500 and Nasdaq Outlook
S&P 500 rally goes on, and the 4,720s are again approaching. Market breadth isn‘t miserable in the least, and the riskier end of the bond spectrum looks positive even if larger time frame worries haven‘t gone away. Classic Santa Claus rally.
Credit Markets
HYG keeps jumping higher – the risk-on sentiment is winning this week. A bit more strength from LQD would be welcome, but isn‘t an obstacle to further stock market gains.
Gold, Silver and Miners
Gold downswing indeed weren‘t to be taken at all seriously – solid gains across precious metals followed. I‘m expecting a not too rickety ride ahead as the metals keep appreciating at relatively slow pace.
Crude Oil
Crude oil extended gains, and even if oil stocks paused, downswing in black gold isn‘t looming. Importantly, the $72 area has been overcome – the bulls should be able to hold ground gained.
Copper
Copper keeps tracking the broader commodities rally, and isn‘t outperforming yet. The red metal‘s long consolidation goes on, and a breakout attempt on par with early Oct seems to be a question of quite a few weeks (not days) ahead.
Bitcoin and Ethereum
Bitcoin and Ethereum are still consolidating Tuesday‘s gains – the performance is neither disappointing nor stellar. Both cryptos don‘t look to be in the mood for a break below Dec lows.
Summary
If not yesterday, then probably today we‘ll get a little consolidation of prior two day‘s steep S&P 500 and commodity gains (copper says) – the positive seasonality hasn‘t spoken its last word. HYG posture has significantly improved, and that bodes well for short-term gains still ahead before we dive into market circumstances turning increasingly volatile towards the end of Q1 2022. For now, let‘s keep celebrating – Merry Christmas once again – and enjoying the relatively smooth ride.
Related: Dollar‘s Warning Signal
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