Leading the Taper Run

Leading the Taper Run

No S&P 500 pause to speak of – bonds support the buying pressure. The broad turn to risk-on has value holding up relatively well while tech remains in the driver‘s seat. The daily weakness in financials looks misleading, and as a function of retreat in yields – I‘m looking for stabilization followed by higher prices. Real estate though is starting to smell a rat – I mean rates, rising rates. Slowly as the Fed didn‘t give the green light, but they would acommodate the unyielding inflation.

There was something in the taper announcement for everyone – the hawks are grasping at the possibility to increase taper pace should the Fed start to deem inflation as unpleasantly hot. I wrote about the dovish side I take already on Wednesday when recapping my expectations into the meeting.

Coupled with non-farm payrolls coming in above expectations, the table is set to reassure the stock bulls that further gains are possible while the lagging commodities move up. Precious metals would continue recovering from the pre-taper anxiety, and miners with copper kicking back in, would be the confirmation. The dollar should welcome the figure corresponding to yields increase, buying a little more time.

One more note on oil – its downswing is positive for the stock bulls as its retreat works to increase disposable income, and in the zero rates environment, kind of acts as a shadow Fed funds rate. Regardless, I‘m standing by the call for triple digit oil prices in 2022.

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

S&P 500 and Nasdaq Outlook

Leading the Taper Run - 1

S&P 500 fireworks are continuing with improving participation, and the path of least resistance remains higher.

Credit Markets

Leading the Taper Run - 2

Universal risk-on move in the credit market still continues, and the long HYG knot isn‘t a sign of a reversal – the bulls merely got ahead of themselves, that‘s all.

Gold, Silver and Miners

Leading the Taper Run - 3

Gold easily reversed the pre-taper weakness, and so did silver. I‘m now looking for the miners to catch up, and a good signal thereof would be a fresh commodities upswing. No, CRB Index hasn‘t peaked.

Crude Oil

Leading the Taper Run - 4

Crude oil hasn‘t peaked either, and appears attracting buying interest already. While $80 were breached, the commodity is getting ahead of itself on the downside – the oil sector doesn‘t confirm such weakness.

Copper

Leading the Taper Run - 5

Copper has stabilized in the low 4.30s, and an upswing attempt is readying – its underperformance of CRB Index would get reversed.

Bitcoin and Ethereum

Leading the Taper Run - 6

Bitcoin and Ethereum consolidation goes on, and nothing has changed since yesterday – stabilization followed by slow grind higher is what‘s most likely next.

Summary

S&P 500 stands to benefit from real economy revival, earnings projections and taper being conducted in the least disruptive way, apparently. Credit markets have made up their mind, and aren‘t protesting the risk-on sentiment, which has come from a temporary commodities retreat (hello, China). Inflation worries should though still return to the fore as the rising rates aren‘t as much a result of improving economy and yield spreads, which the precious metals are sensing already.

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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