Jackson Hole Positioning

More optimistic follow-through yesterday brought additional gains to commodities while stocks and gold treaded water. Just as I wrote yesterday, the celebrations of the taper tough talk being just talk, were a little too powerful, and at least a modest daily consolidation arrived.

Credit markets point to the risk-on moves to continue, favoring the reflation trades as yields and inflation expectations would slowly but surely pick up. The dollar has gone on the defensive again but looks for it to recover some ground as metals and cryptos are gently hinting at today. Are the commodities and precious metals bull runs in jeopardy though? Not in the least as the conditions haven‘t and won‘t change with the Fed taper plays that have rocked the boat last week quite well.

As stated yesterday:

(…) And with much of the tapering done through the repo market in a way already, the focus will shift to the balooning deficits and debt ceiling so as to confront the disappointment creeping in through Monday‘s PMIs and more. I‘m not looking though for a deterioration strong enough to derail the stock market and commodities bull runs. Let alone the precious metals one. A good signal thereof would be widening credit spreads on the long end as the short end has been flattened already.

Let‘s move right into the charts (all courtesy of www.stockcharts.com).

S&P 500 and Nasdaq Outlook

S&P 500 and Nasdaq

Daily pause is all we‘ve seen in stocks yesterday, with Nasdaq hit a little on account of the rising nominal yields. As even value found it hard to sustain gains, we‘re likely to see the consolidation to continue next as big moves before the Jackson Hole is over, are unlikely.

Credit Markets


High-yield corporate bonds continued the march higher, closing on a strong note again – the daily consolidation hasn‘t thus far arrived there. Overall positive turn in credit markets that‘s however leaving it a little extended for today and tomorrow unless the quality instruments rise modestly.

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