Reason And Jubilation

S&P 500 neatly surprised on the upside as it moved in line with yesterday‘s detailed battle plan– strong risk-on day followed. Value was in the lead, volume rose strongly as quite a few CPI internals combined with high Oct 2021 reading to compare against, made for a jubilant (over)reaction in betting the Fed won‘t be as hawkish as Powell projected during the latest conference. It‘s not yet the time though to dampen the bullish spirits or to spring the long-term giant bull trap which just isn‘t there if you‘re thinking in terms of days or weeks. This is still the time of a Q4 rally, with a fine Dec rally carrying over into Jan ahead.

Bond yields retreated and the dollar cratered as those 50bp Dec rate hike bets that I was presenting for weeks as most likely, get acknowledged by the markets – to the cost of USD bulls. Money is coming out of the safe haven hiding place, and markets are still (the Fed is likely to slow down the pace of hikes – we are quite far in the rate-raising cycle) celebrating yesterday‘s stunner to the many expecting a hot print (thankfully not you, I had been as clear as always).

The bulls‘ objective for today is to consolidate comfortably above the 3,960 support, which should be easy given the dollar‘s retreat by another 1% today. On the upside, taking a bite at 4,000s. So far so good. Precious metals rejoiced, and their bullish grind higher is set to continue at its own pace – I‘m still favoring silver medium-term over gold, regardless of the two changing the baton today. Note also the ease with which crude oil returned to $90, and copper strongly bucking the daily silver direction. These are all very fine long core portfolio positions to have while in cryptos the FTX dust hasn‘t settled yet, very far from it (sensitive to surprises both ways).

Keep enjoying the lively Twitter feed serving you all already in, which comes on top of getting the key daily analytics right into your mailbox. Plenty gets addressed there, but the analyses (whether short or long format, depending on market action) over email are the bedrock, so make sure you‘re signed up for the free newsletter and that you have Twitter notifications turned on so as not to miss any tweets or replies intraday.

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

Credit Markets

HYG, LQD and TLT

That‘s the key chart for today – the HYG long lower knot is a bit disconcerting, but should facilitate any meaningful setback today unless TLT confirms. And the long end of the curve is still trying to retreat some more today – this decline in yields though would get questioned, that‘s a matter of time, but no serious challenge would be fielded today. There is a reasonably fine close to a great week ahead!


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