More Than A Snapback Rally In Gold As Stocks Keep Marching

Stock bulls aren‘t wavering, and the upswing continues without a pause. Is the move (still) in balance with the relevant markets as one catches up to the other, or is a digestion of prior sharp gains nearby? It didn‘t come earlier this week, and in today‘s article, I‘ll lay down the rising probabilities of seeing at least a short-term pause in the stellar pace of gains since Monday.

Gold pause gave way to selling pressure yesterday, spurred to a degree by the post-Monday's trading action. As both metals declined by around 2.5%, this move probably appears overdone to more than a few. Me included, as I called it a knee-jerk reaction before yesterday‘s close. In today‘s analysis, I‘ll demonstrate why precious metals investors shouldn‘t be afraid of a trend change – none is happening.

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

S&P 500 Outlook

S&P 500 daily

Stocks continue higher without stopping, and the daily volume rose a little. The bulls are strong, and took prices almost to the upper Bollinger Bands border amid positive moves in CCI and Stochastics. The daily of daily increases looks set to slow down as minimum though – starting today.

Credit Markets

hiugh yield corporate bonds

High yield corporate bonds (HYG ETF) are still pushing higher. While I ignored Tuesday‘s and Wednesday‘s upper knot, yesterday‘s one is arguably a more respectable one, and that‘s because of the drying volume. It wouldn‘t be unimaginable to experience HYG to pause shortly, which would support my prior assessment about SPX.

HYG:SHY vs stocks

High yield corporate bonds to short-term Treasuries (HYG:SHY) ratio with S&P 500 overlaid (black line) shows that the two are tracking each other tightly in recent days. Actually, stocks are reaching for the leadership position, which given their performance since the start of November is very short-term suspect (stocks have lagged a little relative to the credit markets, and now they‘re trying to lead). That‘s yet another reason why to be cautious about (at least today‘s) trading – and for all the coming days, you know now where to find my daily analyses.

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