Taper Smoke And Mirrors

Once the reality of modern monetary theory driven spending in eternity does result in higher inflation biting into real rates even more, the below quote would need to be updated:

(…) 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.

The taper story being revealed for a trial balloon that it is, would quickly reverse Friday‘s sharp USDX gains, where particularly the USDJPY segment is worth watching. In the end, the debasement of fiat currencies against real assets would continue, and accelerate as the dollar goes fully onto strategic defensive in 2H 2021 again.

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

S&P 500 Outlook

S&P 500

Stocks declined, volume remained elevated – so is this the start of a downswing, or rather its closing stage? In spite of weak smallcaps and emerging markets, it‘s the latter – thanks to the credit markets, including emerging market ones.

Credit Markets

HYG, LQD and TLT

It‘s the high yield corporate bonds intraday recovery that appears key here, for the junk bonds joined the investment grade ones and long-dated Treasuries. The dip is being bought in the credit markets.

Technology and Financials

tech, NYFANG and value

Technology recovered from steep intraday losses, and so did $NYFANG. To complete the picture, value stocks were out of the daily favor too.

S&P 500 Market Breadth

S&P 500 market breadth

It‘s not just the advance-decline line or advance-decline volume to pay attention to right now, but the new highs new lows too. All three indicate that we are nearing a local bottom.

Gold and Miners Short-Term

gold , miners and long-dated Treasuries

Gold is quite holding up, yet not totally convincingly, especially when miners are examined. This setup screams danger as the retreating nominal yields were ignored on Friday. But…

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