S&P 500 brief pause is over – nodding to the upswing, credit markets have turned to risk-on, and VIX is going precisely nowhere, just hanging around the 15 level. Such volatility values are conducive to the stock market upswing continuation, and given no real change to the anticipated Fed taper move or the infrastructure bill birthing drama, prior market trends remain in motion.
Q3 2021 hedge fund letters, conferences and more
That means the stock market correction is over (saw that great Tesla move?), and our open long profits can keep growing. In precious metals, silver continues to lead gold in the countdown to the Nov taper – don‘t dare to think, PMs bears, what would unfold should the Fed not deliver. Inflation expectations wouldn‘t be as tame as they are currently – the situation on the inflation front is in my view more dire than before the Jun Fed pacification talk – which turned out empty, of course, but served the key purpose of prepping the markets for the eventual taper arrival.
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Here we are, taper is baked in the cake, but inflation expectations are trending higher. And it shows in the gold to silver ratio that‘s shifting ever more to the bullish silver side – as it should in an environment of permanently elevated inflation that I had been talking about relentlessly since early spring.
Commodities are likewise confirming, and we can look forward for more energy profits. Copper and base metals are very modestly turning up again, and the bulls have a great chance to step in at the nearest occasion of inflationary (well, still reflationary the stock market says) celebrations. That‘s what happens when fresh money doesn‘t stay on commercial banks‘ balance sheets, but goes right into the financial markets.
Cryptos – the key beneficiary of the monetary largesse starting in earnest in Apr 2020 – aren‘t hesitating either, bringing fresh gains, gently confirming my bullish thesis when it comes to real assets outperformance.
Let‘s move right into the charts (all courtesy of www.stockcharts.com).
S&P 500 and Nasdaq Outlook
S&P 500 didn‘t consolidate much intraday, and the credit markets non-confirmation was swiftly dealt with.
The risk-off posture in bonds is history now, and fresh S&P 500 advance is being supported – namely the HYG refusal to decline intraday, is an encouraging sign.
Gold, Silver and Miners
Friday‘s rejection in higher gold values was indeed only temporary, and the slow grind higher can continue. It‘s two steps forwards one step backwards until the Fed disappoints or the realization of more negative real rates hits hard.
Crude oil couldn‘t beat $85, and the intraday dip didn‘t reach really anywhere. The $83 - $84 level looks to be holding all selling for now, and higher prices remain likely once the current hesitation is overcome.
Copper attempted to rise, but couldn‘t make it in spite of the CRB Index upswing, or positive performance in base metals. The price recovery will arguably take a few days before it happens, and gives an opportunity to PMs bears to force a little temporary retreat.
Bitcoin and Ethereum
The Bitcoin and Ethereum bulls are at it again, and both leading cryptos upswing goes on, with Ethereum outperformance being a positive sign.
Stocks are once again pushing to fresh highs, blessed with credit markets confirmation and well behaved VIX. With Fed backed into the corner and practically having to taper in Nov, the bulls can keep running for now. Real assets ascent isn‘t to be punctured, and precious metals led by silver are likely to follow behind commodities. What‘s needed, is more focus on the central bank being dismally behind the inflation curve, more recognition of inflation not being transitory. We‘re getting there, and increasingly negative real rates are paving the way ahead.
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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.