Gold About To Spring As Stocks Cool Off At Highs

Stock bulls aren‘t yielding an inch of ground, and technically they have precious few reasons for doing so. The stock market bull is still strong, and standing in its way isn‘t really advisable. With the S&P 500 at new highs, and the anticipated slowdown in gains over Friday, where is the momentary balance of forces? As the proverbial rubber bands get pushed upwards still, what about those rising probabilities of seeing at least a short-term pause in the stellar pace of gains since last Monday?

Gold did recover on Friday and didn‘t disappoint after Thursday‘s slide. The weak non-farm employment data certainly helped, sending the dollar bulls packing. It‘s my view that we‘re on the way to making another dollar top, after which much lower greenback values would follow. Given the currently still prevailing negative correlation between the fiat currency and its shiny nemesis, that would also take the short-term pressure of the monetary metal(s).

What would you expect given the $1.9T stimulus bill, infrastructure plans of similar price tag, and the 2020 debt to GDP oh so solidly over 108%? Inflation is roaring – red hot copper, base metals, corn, soybeans, lumber, and oil, and Treasury holders are demanding higher yields especially on the long end (we‘re getting started here too). Apart from the key currency ingredient, I‘ll present today more than a few good reasons for the precious metals bull to come roaring back with vengeance before too long.

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

S&P 500 Outlook and Its Internals

S&P 500

Stocks keep pushing higher, and the bulls are strong regardless of the little contraction in the daily volume. The daily indicators attest to the strength of the uptrend, but the pace of daily increases looks set to slow down as minimum though.

equal weight S&P 500

Imagine that all the constituent shares in the S&P 500 had equal weight (i.e. forget about NYFANG) – this is the chart you get. RSP ETF is only now challenging its highs, which is however not a disappointment or a red light flashing divergence at all. The march to new highs in the S&P 500 still looks satisfactorily broad-based.

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