Pause Before The Run

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Pause Before The Run

S&P 500 didn‘t decline much in spite of credit markets favoring a bigger daily setback – is the pendulum about to swing the other way then? It probably is, but it would take a while as I would like to see high yield corporate bonds turn up first. Rising yields are taking a toll on junk bonds as well, yet value stocks managed to eke out some daily gains regardless, and tech didn‘t crater. Bottom line, we saw a daily consolidation, whose key feature was 4,520 support holding up, and that means not too much downside is likely next.

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Q3 2021 hedge fund letters, conferences and more

Mohnish Pabrai On Low-Risk Opportunities And The Recycling Sector

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VIX was rejected both on the upside and downside, meaning that larger moves aren‘t favored now – and probably won‘t happen on Monday. The slow grind higher in S&P 500 is likely to continue, and the dollar is still in a precarious position – having gone down in spite of increase in yields. Well, inflation remains sticky, and Powell‘s latest pronouncements on Nov taper readiness don‘t pack the same punch as they did in Jun. So, as the Treasury markets revolt over inflation calms down for a while, gold and silver are welcoming more negative real rates.

Apart from the miners supporting the upswing (I‘m not too worried about gold giving up much of its intraday gains), commodities continue running. We‘re at a moment of deceptive copper weakness – while the dust hasn‘t settled yet, the red metals is likely to consolidate and rebound next. Crude oil intraday correction didn‘t reach too far, but still triggered taking long oil profits off the table – and the same is true about the long S&P 500 position also. The crypto correction is also turning out to be quite shallow, so let the open profits run.

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 didn‘t keep the opening gains, but recovered from the ensuing downswing – the balance of power between the buyers and sellers is likely to carry over into today‘s session.

Credit Markets

Credit Markets

The risk-off posture in bonds would merit an S&P 500 selloff, but that didn‘t happen - and I‘m not looking for stocks to catch up on the downside with vengeance.

Gold, Silver and Miners

Gold

The heavy volume upswing in gold still favors the bulls in spite of the long upper knot – both miners and silver keep pulling ahead, and don‘t forget about ever more negative real rates.

Crude Oil

Crude Oil

Crude oil intraday dip was shallower than on Wednesday and Thursday, and again readily bought. While Monday isn‘t likely to bring stellar gains, the upswing is set to continue.

Copper

Copper

Copper lower knot is a promising sign that finally, the downswing was bought, and the upper knot gives bulls a chance to attempt a reversal soon. Anyway, the rising volume is a positive sign – now, it‘s about follow through.

Bitcoin and Ethereum

Bitcoin

The Bitcoin correction indeed stopped in the $60K region, and joined by Ethereum, cryptos are peeking higher again as Friday‘s decline has been erased.

Summary

Stocks are consolidating above 4,520, and more likely to go up over the next two days than down. Especially since credit markets will probably turn risk-on now that Powell‘s speech is again over, and didn‘t result in as much temporary selling as prior taper mentions – it‘s that inflation is increasingly biting, and it‘s getting more broadly recognized as not so transitory. The woes are likely to help real assets keep rising – both commodities and precious metals. Look for continued silver leadership accompanied by stock upswings, and for gold performing better during whiffs of risk-off. The run in energy isn‘t over, and that concerns both crude oil and natural gas. Cryptos are well positioned to benefit too.

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Thank you,

Monica Kingsley

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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.

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