Trending
S&P 500 reached my target, and then folded like a cheap suit – into an overnight correction, without attempting to overcome 4,420. As much as the prior advance was broad based, so was the retreat. Tech, value, credit markets – but the decline wasn‘t sold into heavily, and that means the bulls can recover. Still, sizable long profits had been taken overnight automatically, as neither the buyers nor the sellers got anywhere.
The non-farm payrolls thesis goes like this – unless the figure is truly disappointing, the Fed would have to execute on the practically promised Nov taper announcement. Treasury yields aren‘t though buying it, and have ventured higher on their own already, just as inflation expectations did. The debt ceiling has turned into a drama that wasn‘t as the can was kicked down the road into early Dec. The dollar didn‘t react much to the wrangling, but the selling will soon revisit the world reserve currency that is taking its time.
Commodities aren‘t budging, and cryptos continue appreciating while precious metals see encouraging, yet intermittent signs of life that would be delivered through monetary stance reevaluation (that equals no taking the foot off the gas pedal). More follow through is needed in gold and silver, and the white metal should lead the upswing. Copper did confirm it on a daily basis yesterday, but the red metal remains still internally weak – unlike oil that didn‘t even properly pierce the $75 level.
Let‘s move right into the charts (all courtesy of www.stockcharts.com).
S&P 500 and Nasdaq Outlook
S&P 500 formed more of a consolidation than a true reversal candle – the volume wasn‘t there, but the bears can attempt to take on yesterday‘s gap.
Credit Markets
HYG signalled the retreat, and moved practically in a straight line lower after reaching the daily top. Closing at daily lows on significant volume isn‘t a bullish sign.
Gold, Silver and Miners
Gold and silver are directionless, but attempts to move to the downside, are being rejected, and miners keep improving. Much more needs to happen, and be confirmed by the turn in copper, too. Stagflationary data would be the catalyst.
Crude Oil
Crude oil downswing was immediately bought – the bulls aren‘t yielding yet, and energy remains the key commodity upswing driver. Whether the bulls keep most of the high ground and consolidate there, is the key question. My answer is that they likely will.
Copper
Copper continues oscillating in a narrowing range, and the volume is declining – it‘s slowly getting ready for a sizable move, which would help precious metals too.
Bitcoin and Ethereum
Bitcoin and Ethereum are pushing higher after a daily pause, and the open profits are rising. Similarly to oil, the reprieve is being immediately bought – little wonder given the macro environment of stagflationary worries and Fed doubts.
Summary
Stocks are pausing, and have to broadly turn into risk-on mode so as to extend gains above 4,420. We aren‘t yet there, but the bulls will keep climbing the wall of worry once NFPs disappointment wears off. The most beneficial effect would be on real assets – in line with my latest tweet.
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Related: Does the Turnaround in Stocks Have Legs?
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