S&P 500 rebound goes on reflexively, but stormy clouds are gathering – I‘m looking for the bears to reassert themselves over the next couple of days latest. The credit markets posture is far from raging risk-on even though select commodities are recovering (what else to expect in a secular commodities bull) and precious metals suffered a modest setback (not a reversal though). Crypto recovery is nodding towards the risk-on upturn that is though likely to get checked soon.
It‘s great that tech was the driver of yesterday‘s S&P 500 upswing, but for how long would it keep leadership now that attention is shifting back towards inflation. Yesterday I wrote that:
(…) rebound looks approaching as stocks might lead bonds in the risk appetite. When the East European tensions get dialed down, S&P 500 can be counted on to lead, probably more so when it comes to value than tech. That‘s why the tech participation is key as it would make up for the evaporating risk premium in energy. Or precious metals – these are likely to rise once again when the spotlight shifts to the inadequacy of Fed‘s tightening in the inflation fight.
So far the stock market advance hasn‘t met a brick wall, but value upswing has been sold into (unlike tech‘s). Energy stocks lost, but are likely to come back – and the next microrotation might not be powerful enough to carry S&P 500 higher. Anyway without a HYG upswing, stock bulls are facing stiff headwinds.
Let‘s move right into the charts (all courtesy of www.stockcharts.com).
S&P 500 and Nasdaq Outlook
S&P 500 rebounded on low volume but that wouldn‘t be an issue in a healthy bull market – the trouble is that this 2022 price action isn‘t very healthy.
HYG didn‘t trade on a strong note, and the rise in yields continues almost unabated. This is what I meant yesterday by saying that we may be though nearing the point of credit market reprieve – as much as that‘s compatible with rate raising cycle.
Gold, Silver and Miners
Precious metals suffered a temporary setback – they easily gave up some of the safe haven gains, which isn‘t surprising. The bulls though haven‘t lost control, and that‘s key.
Crude oil dip was bought, and there wasn‘t much bearish conviction to start with. The general uptrend is likely to continue, and $90 appears likely to hold over the next few days definitely.
Copper is now in for some backing and filling, but managed to catch up with other commodities a little yesterday. The red metal remains range bound, but making good bullish progress.
Bitcoin and Ethereum
Cryptos are paring back yesterday‘s advance, and unless the mid Feb lows give, they‘re likely to muddle through with a modest bullish bias till the attention shifts to the Fed again.
S&P 500 bulls‘ opportunity seems slipping away with each 1D or 4H candle, and I‘m not counting on the credit markets to ride to stocks‘ rescue. The commodities bull though is likely to carry on with little interference – and so does the precious metals bull as the yield curve keeps compressing. Slowdown in economic growth with rampant inflation and the realization that the Fed tightening hasn‘t had the effect, is awaiting, and would usher in strong gold and silver gains.
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