All Eyes on Copper

All Eyes on Copper

S&P 500 sold off only a little in the wake of CPI data – probably celebrating that the figure wasn‘t 8% but only 7%. As if that weren‘t uncomfortable already – and the Fed wants to field accelerated taper, and perhaps even four quarter-point rate hikes to tame it? Oh, and perhaps also balance sheet reduction through not reinvesting proceeds from matured bonds and notes as talked on Monday – sure, that will do the trick.

Looking at Treasuries over the prior two days shows that the Fed isn‘t being questioned. Value defends the high ground while tech rallies – Monday‘s fear with its brief return Tuesday, is in the rear-view mirror, compacency returning, and VIX again below 18. Prior upswing consolidation right next, is the most likely action for S&P 500.

The real gains though are being made elsewhere – in crude oil and copper. With commodities back on fire, these two have certainly greater appreciation potential next than stocks or cryptos – so, long live our open longs there!

The red metal has defied base metals intraday consolidation yesterday, and that has consequences for inflation trades – silver is waiting in the wings. To give you an idea how mispriced the risk of persistently unpleasant inflation is, yesterday‘s CPI coming only in line with expectations, caused inflation expectations to decline… At least the dollar took a rightful breather – its prior sideways consolidation has been broken to the downside. Currencies are starting to figure out inflation, and just how far and inadequate Fed‘s promise to take on it, has been...

Let‘s move right into the charts (all courtesy of www.stockcharts.com).

S&P 500 and Nasdaq Outlook

All Eyes on Copper - 1

Daily consolidation of prior strong gains that‘s likely to go on today – stocks are making up their mind as to where next in the very short run now that the bears had been repelled.

Credit Markets

All Eyes on Copper - 2

HYG is likewise looking to need some time to move higher next – volume is declining, and a brief sideways move is most likely now.

Gold, Silver and Miners

All Eyes on Copper - 3

Gold and silver are still sideways to up – not down. The pressure to go higher is building up, waiting for the Fed miscalculation, or perception of the consequencies of its upcoming action. The faith in the central bank isn‘t yet really shaken.

Crude Oil

All Eyes on Copper - 4

Crude oil finds it easiest to keep rising – the technical and fundamental conditions are in place, and oil stocks will continue to be the leading S&P 500 performers.

Copper

All Eyes on Copper - 5

Copper is starting to play catch up to the other commodities finally – it‘ll be a rocky ride, but the red metal has waken up, and cast a clear verdict on inflation that has to seep into other markets next. Will take time, but we‘ll get there.

Bitcoin and Ethereum

All Eyes on Copper - 6

Bitcoin and Ethereum didn‘t convince on the upside, and with no dovish surprise on the horizon, the path of least resistance probably remains down for now.

Summary

  1. S&P 500 turnaround is getting cemented, and worries about the hawkish Fed or inflation look to be momentarily receding. Not even the PPI is waking up the markets – the focus seems to be on measly 0.1% undershoot. Ironic, pathetic. While stocks keep on moving in a tight range, and still want to keep on appreciating modestly, the real action is happening in the commodities, to be followed by precious metals.

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Monica Kingsley

Monica Kingsley is a trader and financial markets analyst. Checking dozens of charts daily, she integrates their messages with economics and in-depth experience. Trade calls and writing are her cup of tea as much as studies in market histories. Having been at the financial markets when the Great Recession arrived, she experienced many bull and bear markets - be it in stocks, bonds, gold and silver. Check her out at https://www.monicakingsley.co