Taper Tantrum A Week Before Jackson Hole

Stocks have recovered off the intraday lows yesterday, in what is one of the less severe battles of the unfolding taper tantrum – commodities such as copper and oil bear the brunt thereof, which is perfectly understandable given the slowdown in economic expansion. My yesterday‘s analysis coupled with Monday‘s one has all the details of the fundamental backdrop and Fed positioning (little changed with yesterday‘s Powell virtual town hall meeting).

Markets are simply being nervous here, and it‘s my view that the economic recovery hasn‘t yet peaked, for when I look at various yield spreads, we haven‘t reached levels consistent with the peak (e.g. in the 10-year over 2-year Treasury, by far not). I continue to think we‘re approximately midway into the expansion, and only yield curve inversion would herald an approaching recession to me.

Again, today’s report will be a little shorter than usual and focus on select charts so as to drive position details of all five publications.

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

S&P 500 and Nasdaq Outlook

S&P 500 and Nasdaq

The bears made their appearance, finally – and the increasing volume tells that they‘re probably not done yet. Sideways trading is the best the bulls can hope for, and looking at the credit markets, I‘m not looking for a swift bullish resolution before a thorough test first. Yes, the odds of a serious correction in the S&P 500 have increased again.

Credit Markets


Noticeable hiccup in the credit markets appeared yesterday, making the short-term outlook definitely not bullish. Sideways to down seems to be the most likely scenario.

Gold, Silver and Miners

gold, HUI and TIPS

In spite of continued miners‘ underperformance, gold resilience is understandable in the current risk-off environment with safe haven assets such as Treasuries being sought in order to take cover from the reflation trades getting under fire (and that affects silver too, for it trades as both a precious metal and a commodity).

Crude Oil

crude oil

Energy stocks paint a grim picture, and crude oil‘s downside doesn‘t appear to be over in spite of momentary and relative resilience.



The local bottom has been indeed elusive, as yesterday‘s price action shows. No signs it‘s in either today – the volume is slowly rising, and the bulls haven‘t made their presence known much. When the taper bets get reversed though, look for a swift reversal to the upside – probably not as steep as in gold lately, but still clearly noticeable.

Bitcoin and Ethereum

Bitcoin and Ethereum

Cryptos gave up solid intraday gains yesterday, and haven‘t quite come back today – the outlook is a bit unclear at the moment, with the decisive break of either $48,000 or $44,000 in Bitcoin serving as a litmus test of where next we‘re going.


While the risk of a correction in stocks grows, in many commodities it‘s already here – and getting more pronounced. The decelerating economy and margin debt retreat are taking their toll as much as taper fears, making the dollar rise in what can be described as a (mini) taper tantrum already here.

Does it change the reflation and economic expansion story? I don‘t think so as this has further to go before rolling over, therefore I look for inflation trades to eventually return to strength, and for gold to take advantage of continued monetary accommodation.

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