False Dawn or Not

False Dawn or Not

S&P 500 rose after an initial consolidation, and its advance was broad based. Modest dollar weakness accompanied by a daily increase in yields powered value and tech alike as the pendulum swang to risk-on again. VIX indeed had trouble rising, and the volatility metric has decidedly cooled down for now. These September storms seem quite tame, compared to last year or before.

Commodities though remain on a tear – base metals, energy, and finally to be joined by agriculture. Oil resolved the two day consolidation with an upswing, and didn‘t dink on the inventories report. Precious metals didn‘t have a good day, and the only positive sign was some miners resilience – the disconnect between copper and silver grows wider in spite of both metals (just as much as nickel) being needed for the green economy. Staying with copper, the red metal though has dealt me a nice opportunity to swiftly grab sizable daily profits yesterday, bringing the portfolio chart to a fresh high.

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

S&P 500 and Nasdaq Outlook

False Dawn or Not - 1

The bears lost initiative, and the 50-day moving average once again stood firm – for the n-th time this year. Seems like no correction can make it too far too fast...

Credit Markets

False Dawn or Not - 2

Credit markets erased the prior risk-off turn, and HYG kicked into solid (not high, but very solid) gear again, confirming the daily upswing in S&P 500 as having legs.

Gold, Silver and Miners

False Dawn or Not - 3

Gold remains stuck since the Jun FOMC taper verbal plays capped further upside – the yellow metal has for now trouble overcoming 1,800, and could very well slowly grind a little lower in a fake show of weakness, only to rally on the no Sep taper announcement. As stated yesterday, the bulls better arm themselves with patience.

Crude Oil

False Dawn or Not - 4

Crude oil bulls had a field day, and oil stocks overwhelmingly approved of the upswing. As we‘re nearing the $74 - $76 area of prior local highs, expect a bit of consolidation before higher prices follow, with triple digit oil sticker slated for 2022.

Copper

False Dawn or Not - 5

After trading a bit too much at odds with the CRB, copper indeed staged an upside reversal yesterday. As its underperformance vs. the broad commodities index grows, look for not entirely smooth sailing in the red metal ahead.

Bitcoin and Ethereum

False Dawn or Not - 6

Brief consolidation after the Bitcoin golden cross is here as both leading cryptos consolidate last two days‘ gains.

Summary

Risk taking in real assets has been to a degree joined by the paper ones yesterday. Big picture, both classes are expected to do well unless the Fed presses the break pedal, and decreases its pace of monetary activism. As that‘s unlikely to happen over the nearest weeks, we can look forward for riding out the Sep storms, to be followed by more price gains namely in commodities and stocks.

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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