S&P 500 upswing continued amid increasing credit market support. Risk-on, finally – and commodities are on fire again, with precious metals awaiting their time in the spotlight. That‘s the big picture view as markets keep digesting the recently upgraded hawkish talk of the Fed. Or more precisely in my view, they‘re sniffing out the inevitability of the Fed having to make a U-turn later this year. Meanwhile, any temporary hint of lower Treasury yields – the reprieve is arriving – is eagerly embraced by the tech while value is disregarding that. As a result, S&P 500 market breadth is improving, and as stated yesterday, the positive seasonality of 2nd to 3rd week of Feb, is working.
Today‘s CPI data would show inflation isn‘t relenting – even White House warned about hot year on year figure coming. Coupled with the tightening job market, the question is now what remains of the budding S&P 500 upswing and bond market reprieve. It‘s becoming increasingly clear that the Fed would have to really move, and that inflation is biting and not exactly sinking input costs. That‘s where we have the cost-push inflation I talked relentlessly over many quarters last year, and wage pressures joining at the hip.
It‘s really about letting copper and oil profits keep growing now, while taking off S&P 500 long ones off the table. Done, and PMs are to join next.
Let‘s move right into the charts (all courtesy of www.stockcharts.com).
S&P 500 and Nasdaq Outlook
S&P 500 bulls had a great day, and need a solid close today against the poor inflation data. This isn‘t though likely to happen unless bonds hold up well during the regular session. Mission impossible, almost.
HYG extended gains yesterday, and would need to defend them today. What remains of the risk-on posture, is key to determining the stock market rally longevity vs. waning power.
Gold, Silver and Miners
Precious metals are firmly on another upleg – I‘m not looking for setbacks during the opening selling pressure to last. The direction is firmly up.
Crude oil is still pausing, but at the same time the bulls are readying a response. I‘m looking for continued trading in the recent range, followed by a break higher.
Copper is finally on the move, and the high volume speaks plenty about the buying pressure. I‘m looking for dips to be bought – I‘m not expecting a stampede of the bears taking advantage of a „shorting opportunity“.
Bitcoin and Ethereum
Cryptos aren‘t plunging, but the test of the bullish resolve is arriving today – let‘s see what kind of reversal it turns into. The volume looks solid, so I count on more than a daily setback as a minimum.
- S&P 500 meets unpleasantly high inflation, which is forcing the hand of the Fed. Stocks are going to have a hard time recovering, and the bullish window of opportunity may be drastically shortened. Good to have taken profits off the table automatically through the trailing stop-loss – commodities would be more resilient. That‘s where real gains are – in real assets, as inflation is returning to the spotlight. Rightfully so as the Fed is desperately behind the curve, and precious metals need to fully get that.
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