Janet Smoke And Mirrors

Weak overnight trading gave way to tepid European session with a predictable buying interest at the U.S. open – which fizzled out though after a few minutes. The tight range consolidation of late gave way to heavy selling as Janet Yellen talked rate hikes and inflation. Friday‘Kaplan trial baloon, and now this – she walked back her statement in the aftermarket, and stocks kept recovering since.

Even the VIX upper knot doesn‘t look so spooky anymore, but the options traders aren‘t convinced. But how many such headline shocks have we seen recently? Capital gains tax plans, anyone? See how the market did next, shaking off the shock and rising on the Fed‘s continued liquidity wave next. Watch what they do, not what they say – and for now, the ingredients are still in place for further stock gains, and I made a good decision to buy yesterday‘s dip on signs of intraday stabilization.

Even long-dated Treasuries dialed back their gains and inflation expectations receded on this perceived readiness to take that pesky „transitory“ inflation seriously. The dollar though had a hard time reversing Monday‘s losses that were virtually guaranteed once the 2021 mini-taper tantrum played out on Friday in currencies. The big picture is still the same – we‘re still living the good reflation, and even if it doesn‘t miraculously rekindle lasting inflationary flames, the print & spend magic recipe will be tried again until it does.

Gold rose on the S&P 500 selloff only to reverse lower, but has anything materially changed? Miners keep doing better – they declined less, and the volume wasn‘t just there to the same extent as with the yellow metal.

And the other commodities? I‘m known for incessantly beating the copper bullish drum, and also the oil one, and here we are with further gains added since my latest oil analysis. Silver might pull back a little here, but look for it to mirror the insatiable appetite for base metals and other commodities. Beyond the Green New Deal mandates, the monetary demand is set to help power the white metal higher.

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