S&P 500 rose on lower than expected core PCE only to be dragged down by tech and hesitant cyclicals. Just Russell 2000 held up best before and in the aftermath of the data thanks to rate cut odds going up and Treasuries rising. Risk taking in junk corporate bonds or financials was muted, contributing mightily to the steep but orderly downside reversal in S&P 500 and Nasdaq, best suited to taking advantage in intraday terms (almost 200 Nasdaq points captured).

The trade was looking fine in swing terms as well, of course, but only till the closing phase of the session – month end positioning, buying in the final 30 min flipped the overall picture modestly bullish thanks to financials, industrials and staples with defensives.

The ascent wasn't due to any sudden realization about inflation – macroenomic logic of approaching rate cuts (seen Chicago PMI?) coupled with economic growth slowing to crawl speed and poor quarterly corporate profits would rightfully dictate decline in equities, and that‘s what‘s been underway for most of the session.

Similarly, precious metals justifiably rose following the data release, but then a barrage of selling into the strength made them turn red as if the Fed were to turn hawkish, as if yields or the dollar rose. Expect that none of these happened – the case of silver followed by gold were truly peculiar.

This is how I commented on that in the Trading Signals intraday channel.

The 4-hour chart shows the inverted head and shoulders pattern invalidated, and there will be a freshly contested area of the head around $30 spot if the close around 30.40 doesn't inspire the Asian markets enough already. Technical damage has been done, and it‘s about how near to Friday‘s close the bottom emerges.

The point I am making that precious metals, copper and oil, they all were under pressure following a disinflationary core PCE, seeing their gains gone following NYSE open.

Monday we have ISM manufacturing PMI and prices – I don't think we get 51 or higher, probably closer to 50 or below (recent regional surveys weren't convincing and GDP was awful), and within prices, the reading is likely to be hot again, comfortably 60, which would reaffirm the stagflation theme I predicted 7 days ago to return before the week is over. That wouldn't be too great for rate cut odds until the realization the Fed would sacrifice inflation fight in favor or real economy support (even if the job market isn't now falling apart) kicks in. And it will kick in.

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

Credit Markets

Retreating yields reflect only incoming disinflationary figure and rate cut odds salivation, not a strengthening real economy. It‘s not about less fear of inflation as TIP (the ETF of TIPS) with its Friday upswing shows.

Gold, Silver and Miners

Following the silver inverse H&S invalidation, it‘s now an open question whether Friday‘s smashing was it, or the deeper support zone till $29.50 gets visited ($29 would be an even stronger level). Low daily volume only shows that Asian markets were closed to take advantage of the decline, therefore little to no dip buying – it‘s questionable how much more power the silver short sellers have here. Miners and their other funds such as GOAU and ASA performed much better, and that provides a reasonable expectation of Monday being up for both metals.

As written twice lately, I firmly consider precious metals led by silver to turn out as the brightest spot in the coming days and weeks, even if silver bulls didn't withstand the sellers following core PCE, and didn't buy credible bond market signs of inflation making a return (TIP and also perceptions of bond auctions).

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