One More Day Of Hesitation?

Stocks reached for new ATHs but got slammed down only to recover next. VIX doesn‘t provide a picture of calmness really even though the put/call ratio seems still uneventful, and credit markets leaning risk-on. The Fed naturally didn‘t draw any hawkish cards on Wednesday to disconcert the markets, yet they‘re throwing a fit a day later, starting from equities, bonds, all the way to precious metals.

One would have said that as:

(…) The Fed won‘t simply remove the punch bowl, let alone discuss removing it, and will keep repeating the transitory inflation mantra ad nauseam. The ingredients are in place for a continued upswing in stocks and commodities.

But stocks are questioning that in today‘s premarket session, in spite of nominal yields not exerting a real pressure on the sensitive S&P 500 sectors. Technology has recovered from an intraday plunge, and semiconductors (XSD ETF) didn‘t lead lower in any way. The defensives had a good day really while the usual suspects (value, cyclicals) benefiting from rising yields, did great – even though long-dated Treasuries (TLT ETF) almost closed the bearish gap.

Treasuries though took their toll upon gold – the nominal yield going up did bite, even though inflation expectations rose in tandem, and not at all hesitantly. It‘s as if the market place didn‘t deem inflation at the moment too high, i.e. as if real rates were actually rising (those believing so are in for a surprise). Personally, I find it odd that the transitory inflation story is still getting some ear, and wonder when last have the lumber, oil, copper, iron, nickel, zinc, corn, soybean (and soon also coffee) prices been checked.

Dollar bulls, remember:

(…) we‘re in the decade of precious metals and commodities super bull runs – and these are well underway. The debasement of fiat currencies against real assets is set to continue, and will accelerate given the unprecedented fiscal and monetary support already and ahead – sorry dollar bulls, the greenback declines are resuming.

Let‘s move right into the charts (all courtesy of

S&P 500 Outlook

S&P 500

Stocks made the move, were rebuffed, and returned. Some backing and filling would be hardly surprising though.

Technology and Financials

tech, NYFANG and financials

Technology recovered from steep intraday losses, and their chart doesn‘t look to be breaking down. $NYFANG isn‘t in a decline mode, and your typical defensive sectors scored strong gains yesterday. And as the sectors usually embracing rising rates did well, chances are yesterday‘s S&P 500 setback would shortly be forgotten.

Inflation Expectations

inflation expectations

Inflation expectations are rising again, and so do the Treasury yields. These aren‘t frontrunning expectations by much, but the brief respite in the bond market surely seems to be about over.

Gold, Silver and Miners

gold and long-dated Treasuries

Gold yet again caught a bid, and recovered a good portion of intraday losses. The buyers stepped in but given the lull in the nominal yields drawing to its end, seeing gold mirroring the rise in yields is disconcerting. On the other hand, copper consolidated on the day, and thus didn‘t counter the Treasuries effect.

gold, silver and miners

While gold is under short-term pressure and well bid, miners had a worse day, and didn‘t outperform the yellow metal. It‘s only within GDX that the chart is more optimistic – not within HUI. Talking silver, it‘s actually good the metal didn‘t move at all on the day – in spite of the challenging setup, the precious metals appear to be making a low.


The S&P 500 is still meeting headwinds, remaining vulnerable to more backing and filling. The bullish signs are still there, but not getting all the short-term follow through (HYG, IWM, EEM), and it looks that closing at new ATHs won‘t happen today. Patience.

Gold and miners are likely making a bottom here, in spite of inconclusive HUI performance. Silver resilience along with base metals is tipping the scales towards maintaining even the very short-term bullish outlook – let alone the medium-term one. The next upswing is approaching.

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Disclaimer: All essays, ...

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