S&P 500 pause goes on, and bonds support more of it to come. Tech keeps thus far the high ground gained, but value is showing signs of very short-term weakness – and yields haven‘t retreated yesterday really. The correct view of the stock market action is one of microrotations unfolding in a weakening environment – one increasingly fraught with downside risks.
Gates Capital Management's ECF Value Funds have a fantastic track record. The funds (full-name Excess Cash Flow Value Funds), which invest in an event-driven equity and credit strategy, have produced a 12.6% annualised return over the past 26 years. The funds added 7.7% overall in the second half of 2022, outperforming the 3.4% return for Read More
To be clear, I‘m not looking for a sizable correction, but a very modest one both in time and price. It‘s a question of time, and I think it would be driven by tech weakness as the sector has reached lofty levels. It‘ll go higher over time still, but this is the time for value and smallcaps in the medium term.
The dollar though isn‘t putting much pressure on stock, commodity or precious metals prices at the moment – such were my yesterday‘s words:
(…) when the dollar starts rolling over to the downside (I‘m looking at the early Dec debt ceiling drama to trigger it off), emerging markets would love that. And commodities with precious metals too, of course – sensing the upcoming greenback weakness has been part and parcel of the gold and silver resilience of late. Precious metals are only getting started, but the greatest fireworks would come early spring 2022 when the Fed‘s failure to act on inflation becomes broadly acknowledged.
For now, they‘re still getting away with the transitory talking points, and chalking it down to supply chain issues. As if these could solve the balance sheet expansion or fresh (most probably again short-dated) Treasuries issuance (come Dec) – the Fed is also way behind other central banks in raising rates. Canada, Mexico and many others have already moved while UK and Australia are signalling readiness – the U.S. central bank is joined by ECB in hesitating.
And that‘s what precious metals would be increasingly sniffing out. Commodities are joining in the post-taper celebrations, and my prior Tuesday‘s market assessments are coming to fruition one by one. Oil is swinging higher and hasn‘t topped, copper is coming back to life, and cryptos aren‘t in a waiting mood either.
Let‘s move right into the charts (all courtesy of www.stockcharts.com).
S&P 500 And Nasdaq Outlook
S&P 500 pause is here, and all that‘s missing, is emboldened bears. They may or may not arrive given that VIX keeps looking lazy these days – either way, the risks to the downside are persisting for a couple of days at least still.
HYG strength evaporated, but it‘s on a short-term basis only. The broader credit market weakness would get reversed, but it‘s my view that quality debt instruments would be lagging.
Gold, Silver and Miners
Gold and silver continue reversing the pre-taper weakness – the upswing goes on, but is likely to temporarily pause as the miners‘ daily weakness foretells. Still, I‘m looking for more gains with every dip being bought.
Crude oil bulls continue having the upper hand, no matter the relative momentary stumble in maintaining gains – the energy sector hasn‘t peaked by a long shot.
Copper is participating in the commodities upswing – not too hot, not too cold. Just right, and it‘s a question of time when the red metal would start visibly outperforming the CRB Index again.
Bitcoin and Ethereum
Bitcoin and Ethereum consolidation has indeed come to an end, and both leading (by volume traded) cryptos are primed for further gains.
S&P 500 breather remains a question of time, but shouldn‘t reach far on the downside – the bears are having an opportunity to strike as credit markets have weakened, and there isn‘t enough short-term will in tech to go higher still. The very short-term picture in stocks is mixed, but downside risks are growing. The dollar is already weakening, much to the liking of commodities and precious metals – there is still enough liquidity in the markets as any taper can be easily offset by withdrawing repo money sitting on the Fed‘s balance sheet.
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.
Stock Trading Signals
Gold Trading Signals
Oil Trading Signals
Copper Trading Signals
Bitcoin Trading Signals
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.