Fireworks largely continued yesterday. In stocks, it must be said – but the picture isn‘t one of universal strength as tech and value diverged again. As VIX is trading near the lower end of its recent spectrum, the bulls better wait for when Friday‘s Powell euphoria gets questioned in the markets. The most important turn of last week had been the removal of immediate and hard hitting taper (together with misplaced tightening notions) – now, we‘re enjoying the kiss of life this breathed into quality assets. Quality, that means those in strong, established bull uptrends, and those beaten down a bit too much in the prior whiff of fear.
In August, Mohnish Pabrai took part in Brown University's Value Investing Speaker Series, answering a series of questions from students. Q3 2021 hedge fund letters, conferences and more One of the topics he covered was the issue of finding cheap equities, a process the value investor has plenty of experience with. Cheap Stocks In the Read More
We‘ll have to be selective as the fuel supply powering the "practically everything" statement below, is getting tighter:
(…) The hazy taper silhouette remains just that, and his speech brough more implicit assurances that any dreaded hawkish turn, which was what the markets were clearly fearing given the jubilee thereafter. Practically everything caught a spark – tech, value, amazingly smallcaps, silver, gold, copper, a little lagging oil. It‘ll take a while for the currently undervalued emerging markets to catch up – look for that to happen once the dollar bids farewell to its trading range (it looks getting ready to test its lower border, in due time).
Credit markets confirm the risk-on moves to continue – there is no immediate warning to the contrary. But as you‘ll read further on, daily gyrations are likely to come back, and that has implications for the daily rotations between tech and value. Crucially, the dollar isn‘t protesting, and remains subdued. Given the crosscurrent of real economy slowdown in incoming economic data, and inventories replenishment needs amid challenged supply chains, the USD price action hints at the world reserve currency getting ready to welcome lower values. Understandably, that has positive implications for emerging markets as these saw their valuations decline a bit too much.
Let‘s move right into the charts (all courtesy of www.stockcharts.com).
S&P 500 and Nasdaq Outlook
Strong upswing on the surface, but stocks look likely to consolidate the move next. By consolidate, I mean I am not looking for any kind of overly sharp a drop.
Credit markets are supporting the stock market upswing, but getting a little tired – a brief pause wouldn‘t be unimaginable.
Gold, Silver and Miners
Gold, silver and miners got under modest pressure yesterday, but the silver downswing points to its temporary nature. Precious metals look primed to do better in the coming days.
Crude oil bulls barely closed the day unchanged, and a modest setback looks likely before higher prices reestablish themselves.
Copper is sending even more bullish signals than silver does – don‘t look at the red metal to escape the brief consolidation coming first though.
Bitcoin and Ethereum
As stated yesterday, cryptos keep on consolidating, base building, making mostly higher highs and higher lows. It appears only a question of time before the fresh upleg comes.
Risk-on trades look to be questioned a little next – what else to expect followintg the Powell dovish speech. Look for it to be a temporary move only though as there isn‘t enought reasons or catalysts to derail the bull market runs.
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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.