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Between A Rock And A Hard Place

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S&P 500 stopped consolidating in the 4,340s shortly after the open, and went largely one way since – except for the run up to the closing bell, which I used to grab short profits off the table. The overnight pump is at work today – not vigorously, but still. Given the credit market posture (yields not rising much on the day), a brief retracement in tech can be expected – especially since yesterday‘s outage news were what powered it in the first place.

Q2 2021 hedge fund letters, conferences and more

VIX has gone nowhere yesterday, and looks unwilling to spend much time below 21 really. We‘re at crossroads where the supports I mentioned on Thursday, are giving way one after another. 4,260s are next in line, followed by 4200s – it would take time to get there, and Friday‘s non-farm payrolls could be the catalyst. Unless they come in outrageously weak, the Fed is likely to announce taper in Nov – monetary policy deceleration into a weakening economy while inflation expectations are rising, supply chains increasingly strained to the point that the International Chamber of Shipping has issued a red alert warning of a global transport systems collapse – make you go hmm.

Something tells me the Fed won‘t be as successful jawboning inflation as in June – its favorite metric, the PCE deflator, isn‘t yielding, and the realization that inflation is here to stay, is creeping in. I don’t know how so much of the financial universe could have been duped by the transitory narrative… for so long.

The energy squeeze is on – I cashed in sizable oil profits yesterday (check at my site the portfolio performance at fresh highs!) – the dollar is stalling, cryptos are rising and adding to open profits too, while precious metals are waking up. I‘m looking for silver to lead and be more resilient – the gold to silver ratio falling first below 73 would be a welcome confirmation of the budding broad recognition of inflation across the markets.

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

S&P 500 and Nasdaq Outlook

S&P 500

S&P 500 volume doesn‘t show the buyers are serious here. This downswing isn‘t over.

Credit Markets

Credit Markets

HYG was really weak yesterday, but the quality debt instruments positioning hints at a reprieve, at a risk-off led S&P 500 pause next.

Gold, Silver and Miners

Gold

Gold and silver upswing was finally joined by the miners – the sentiment is warming up to further gains.

Crude Oil

Crude Oil

The crude oil elevator hasn‘t stopped yet, but I wouldn‘t be surprised by a consolidation of gained ground next.

Copper

Copper

Copper upswing was a bit too readily sold into, and the volume wasn‘t stellar. This long sideways trend isn‘t over yet.

Bitcoin and Ethereum

Bitcoin

Bitcoin and Ethereum are approaching the early Sep highs – and look likely to overcome them.

Summary

Stock market bears still have the upper hand, and credit markets are signalling caution. None of the intraday reversals to the upside have stuck, and we haven‘t reached a local bottom yet. Coupled with the stagflationary undertones, the cyclically sensitive commodities have a harder time than oil. The dollar is likely to come under increasing pressure, which would underpin precious metals and commodities alike.

Thank you for having read today‘s free analysis, which is available in full at my homesite. There, you can subscribe to the free Monica‘s Insider Club, which features real-time trade calls and intraday updates for all the five publications: Stock Trading Signals, Gold Trading Signals, Oil Trading Signals, Copper Trading Signals and Bitcoin Trading Signals.

Thank you,

Monica Kingsley

Stock Trading Signals

Gold Trading Signals

Oil Trading Signals

Copper Trading Signals

Bitcoin Trading Signals

www.monicakingsley.co

[email protected]


All essays, research and information represent analyses and opinions of Monica Kingsley that are based on available and latest data. Despite careful research and best efforts, it may prove wrong and be subject to change with or without notice. Monica Kingsley does not guarantee the accuracy or thoroughness of the data or information reported. Her content serves educational purposes and should not be relied upon as advice or construed as providing recommendations of any kind. Futures, stocks and options are financial instruments not suitable for every investor. Please be advised that you invest at your own risk. Monica Kingsley is not a Registered Securities Advisor. By reading her writings, you agree that she will not be held responsible or liable for any decisions you make. Investing, trading and speculating in financial markets may involve high risk of loss. Monica Kingsley may have a short or long position in any securities, including those mentioned in her writings, and may make additional purchases and/or sales of those securities without notice.

Our Editorial Standards

At ValueWalk, we’re committed to providing accurate, research-backed information. Our editors go above and beyond to ensure our content is trustworthy and transparent.

Monica Kingsley
Editor

Between A Rock And A Hard Place

When you purchase through our sponsored links, we may earn a commission. By using this website you agree to our T&Cs.

No, it‘s not about stocks, however well they hang on to recent gains. ATHs hit again amid recovering corporate credit markets, with both tech and value contributing. Value though was looking more vulnerable going into yesterday‘s session, and just one look at financials or energy confirms that – in the world of question marks over high pace of economic growth, it‘s the Fed that‘s between a rock and hard place.

Q2 2021 hedge fund letters, conferences and more

On one hand, they have stubborn and quickening inflation to deal with (or pretend to deal with through the FOMC, the federal open mouth committee) – getting ahead of the curve means serious tightening (okay, first getting less loose monetarily, which is what taper is about). Given China‘s slowdown and corresponding U.S. figures projected, it would be a tall order to turn off the spigot into a weakening (but still growing) economy – that has potential to trigger quite a correction in stocks and risk-on assets. Note copper and oil paring recent gains, and going largely sideways for weeks – not rolling over, but the light is amber, irrespective of the infrastructure bill.

On the other hand, if the central bank does nothing, inflation would grow even more entrenched, sinking the stock market and economy over time, anyway. Don‘t forget about the massive spending – the Fed turning restrictive isn‘t the math favored outcome here.

Bond yields aren‘t squeezing the Fed‘s hand – the market is paying more attention to growth than inflation at the moment. And that means headwinds for the reflation and commodity trades as these would find rising rates more conducive. Copper to gold ratio is seeing every spike sold since June, underlining the tug of war between the prospects of economy roaring ahead vs. hunkering down.

In such an environment of uncertainty, gold is the winner – just as I summarized it yesterday:

(…) Regarding the taper noises many Fed speakers made during the week (it isn‘t just about Dallas), some form of taper looks indeed coming, even though they would have a hard time pulling it off against decelerating economy and massive fresh spending. Mission impossible if you will. Still, they make the appearance of wanting to try – wouldn‘t tanking markets and fresh calls to do something be a perfect excuse to expanding balance sheet solidly again? But they must at least internally in the Eccles building understand that a move against inflation is long overdue, and perhaps a repetition of June FOMC wouldn‘t do the trick this time.

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

S&P 500 and Nasdaq Outlook

S&P 500

Against all odds euphemistically said, the slow grind higher in stocks continues, with tech getting momentarily a little stronger than value. Volume is so far still behind the upswing – regardless of what the VIX and put/call ratio look like, the bulls aren‘t yet challenged.

Credit Markets

Credit Markets

Credit markets upturn continues, but not before having to repel heavy selling at the open. The chart offers no warning signs for the bulls at the moment, with the exception of risk-on optimism being vulnerable to a suddent souring that would hit many advancing stocks hard. Financials weakness yesterday is a watchout reflective of Treasury yields path.

Gold, Silver and Miners

Gold

Given the growth fears sentiment of the moment, miners‘ underperformance is more understandable – the yellow metal is set to do well in such circumstances. Silver weakness reflects select commodities such as copper getting under pressure, which equals risk-off undercurrents.

Crude Oil

Crude Oil

Energy stocks do a little worse in such an environment, making the daily oil resilience a temporarily good sign – one that I wouldn‘t read too much into for now as the volume isn‘t consistent with a budding reversal.

Copper

Copper

Likewise in copper, the modest rebound off the lows isn‘t convincing – there are no signs of heavy buying thus far, making the local bottom still elusive.

Bitcoin and Ethereum

Bitcoin

Crypto base building goes on, and the recent price action remains positive for the bulls.

Summary

While the risk of a correction in stocks grows, in many commodities it‘s already here. The decelerating economy as evidenced by today‘s retail sales, is lifting primarily gold, and isn‘t any obstacle to cryptos just yet – the dollar isn‘t biting and yields remain range bound, therefore I look for inflation trades to eventually return to strength.

Thank you for having read today‘s free analysis, which is available in full at my homesite. There, you can subscribe to the free Monica‘s Insider Club, which features real-time trade calls and intraday updates for all the five publications: Stock Trading Signals, Gold Trading Signals, Oil Trading Signals, Copper Trading Signals and Bitcoin Trading Signals.

Thank you,

Monica Kingsley

Stock Trading Signals

Gold Trading Signals

Oil Trading Signals

Copper Trading Signals

Bitcoin Trading Signals

www.monicakingsley.co

[email protected]


All essays, research and information represent analyses and opinions of Monica Kingsley that are based on available and latest data. Despite careful research and best efforts, it may prove wrong and be subject to change with or without notice. Monica Kingsley does not guarantee the accuracy or thoroughness of the data or information reported. Her content serves educational purposes and should not be relied upon as advice or construed as providing recommendations of any kind. Futures, stocks and options are financial instruments not suitable for every investor. Please be advised that you invest at your own risk. Monica Kingsley is not a Registered Securities Advisor. By reading her writings, you agree that she will not be held responsible or liable for any decisions you make. Investing, trading and speculating in financial markets may involve high risk of loss. Monica Kingsley may have a short or long position in any securities, including those mentioned in her writings, and may make additional purchases and/or sales of those securities without notice.

Our Editorial Standards

At ValueWalk, we’re committed to providing accurate, research-backed information. Our editors go above and beyond to ensure our content is trustworthy and transparent.

Monica Kingsley
Editor

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