Decreasing volatility gives way to a rising one, but don‘t look for it to happen just today. More paring the risk-on bets seems the order of the day as even the dollar and nominal yields went down together. Gentle signs of deterioration were visible in copper wavering intraday and oil getting a bit too optimistic. Stocks though continue running, or should I better say crawling, ahead as value repelled a downswing attempt.

Margin debt is contracting, M2 not exactly at the prior rates of growth, but celebrations in the paper and real asset markets largely go on. Gold and silver are understandably lagging in the drummed-up taper expectations, but I‘m not looking for any kind of dramatic statement from the Fed. The two steps forward, one step backwards melodrama is likely to continue into the September FOMC, and even that may very well leave the markets guessing. The Fed is in no position to tighten, the economic recovery is likely to continue, and the central bank won‘t kill it – which means continuous noises, and data dependency as they like to call it.

Seeing through the bluff and long journey ahead towards anything even remotely resembling normalized monetary policy, markets would return to the risk-on stance while being more selective in the stock and commodity bull runs. Gold would also benefit from the returning inflation pressures, and the dollar will resume its bear market.

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

S&P 500 and Nasdaq Outlook

Market participants are reluctant to move one way or the other too much next. A little paring back of recent optimism looks most probable to me before the Jackson Hole.

Credit Markets

High-yield corporate bonds are getting way too stretched here, and that increases the odds of a downswing surprise reaching well beyond stocks, into commodities too.

Gold, Silver, and Miners

Gold took the nominal yields cue, ignoring the dollar – the yellow metal‘s downswings prior to key events are almost a ritual. Watch for the miners, yields, and USD to tip their hand before – my bet is on not too much downside followed by shaking off the little clarity to be introduced by the Fed. Purposely, they won‘t release anything market moving, and that could very much disappoint the taper crowd.

Crude Oil

Crude oil rebound is getting short-term extended but is unlikely to roll over hard and fast.

Copper

Copper ran into resistance, and I‘m not looking for it to be overcome very fast. The commodity index though keeps sending positive signals mid-term.

Bitcoin and Ethereum

Cryptos are momentarily undecided but the upswing is very far from rolling over. Some more consolidation followed by a new upleg, appears most likely.

Summary

Before the Jackson Hole, I‘m not looking for extensive and sustainable moves one way or the other – that‘s still true. With enough appetite in the risk-on trades reaching short-term saturation point, look for renewed upleg to modestly continue once the Fed meeting gets out of the way.