The S&P 500 refused to keep early gains, and reversed back into no man‘s land – on little convincing volume. For now, we remain chopping below the 4,180 level, which, if conquered on a closing basis, would prove to be a bullish achievement. Until that happens on convincing internals, false moves in either direction may remain.

The Fed telegraphing the talk about tapering is a first step in preparing the markets to not get surprised by the actual deed, but how far of a step is that one, really? Stocks, bonds, and currencies aren't reacting much – it‘s only commodities that are in consolidation mode, but this can be chalked down to inflation expectations calming down over the prior three trading days.

Until the Fed truly moves or makes its forward guidance as unequivocal as can be in this respect, the markets may continue displaying a doubting attitude (or at a minimum, a wait-and-see one):

"The market simply isn't convinced the Fed is serious about taking on inflation through (gradual) removal of the punch bowl – or about shaping its forward guidance credibly this way (yet). Inflation expectations are cooling down a little, and the Treasury market is tracking them closely.

"But this doesn't mean that bonds are taking the central bank seriously – this move is part and parcel of the transitory vs. getting (practically permanently unless a Fed game changer arrives – still unlikely) elevated inflation readings debate.

"While I think that the red hot CPI inflation would die down a little (i.e. not keep rising ever as steeply as was the case with Wednesday‘s data) once the year-on year-base to compare it against normalizes, a permanently elevated plateau of high and rising inflation would be a reality for more than foreseeable future simply because the Fed would be as behind as Arthur Burns was in fighting the 1970's inflation, and upward price pressures in the job market pressures would kick in."

Thus, look for the Treasury market calm to continue affecting the defensive sectors and, to a certain degree, tech as well. Technology isn't being rotated into strongly, anyhow – the reopening trades are the star performers as the NYFANG index lags behind. Tech rebounded off very oversold levels, and it isn't likely to revisit them. That‘s the essence of my (moderately but still) bullish Nasdaq calls and open S&P 500 positions.

Gold and silver have been going different ways, with the white metal driven by commodities giving off air. The gold sector, though, remains well-positioned as the miners keep pulling ahead, nominal yields aren't rushing headlong to the upside, and inflation isn't turning around.

Copper, relative to the 10-year Treasury yield, remains something to watch out for, with the red metal especially relevant to silver. For now, gold remains a coiled spring with limited downside, that is, until conditions materially change and my open gold profits can keep growing at their own pace.

Crude oil found a daily bottom that looks promising to hold at first sight, but the oil index (XOI) gave up all of its intraday gains. In this light, the crude oil rebound looks a bit stronger short-term than could have been expected, meaning that a downswing attempt in black gold can‘t be excluded. At the same time, upside potential is greater, though.

Bitcoin (BITCOMP) made one more attempt on Wednesday‘s lows on Sunday, and ethereum (ETH-X) undershot them. Both have swung higher but remain well below Friday‘s levels – the lookout remains tense, at least until $38,000 in bitcoin and $2,400 in ethereum are convincingly taken out. Let‘s move right into the charts.

S&P 500 Outlook

The S&P 500 didn't undergo a reversal on Friday; the volume or conviction of the sellers just wasn't there. Contrast that with Nasdaq (black line), and the turn lower looks menacing – at first glance. There wasn't any real volume to talk of in QQQ (and neither in SPY, for that matter). Tech overall would keep underperforming, but the sector has been beaten down a bit too much.

Credit Markets

High yield corporate bonds performed better than the investment grade ones, while long-dated Treasury yields once again retreated. The sentiment is turning back to a risk-on attitude.

Technology and Value

Tech, driven by its riskier segments, keeps rising while the NYFANG index dragged its feet on Friday. Value saved the day in spite of giving up all intraday gains, as TLT repelled its bears.

Gold, Silver and Miners

The precious metals sector is cooling off without giving up gained ground. Miners aren't leading to the downside, and nominal yields could provide a greater tailwind to the yellow metal. Thanks to inflation expectations and commodities at the moment, it doesn't have that tailwind.

Silver is losing altitude as much as copper is, but the red metal‘s ratio to the 10-year Treasury yield isn't pulling the metal down – because of real rates barely changing.

Crude Oil

Crude oil is getting situated, and the forces between the bulls and bears are more than even now – current prices are attracting buying interest, which might take a while to materialize in sustainably higher prices unless the oil index recovers, too.

Summary

S&P 500 bulls remain supported by the credit markets, with value pulling ahead again while tech‘s worst performance appears over. It is time to be bullish the 500-strong index and look for a Nasdaq entry point, as the sideways trading full of fake breaks higher or lower is slowly drawing to its end.

Gold and miners defend gained ground, but look for silver to remain vulnerable to the downside thanks to the pressure on commodities that I expect from both the bond markets and inflation expectation moves.

Crude oil is stabilizing and the oil index supports higher prices, but one more pullback might be on the cards. And should commodities turn red en masse again, black gold would probably not escape.

Neither bitcoin nor ethereum have truly stabilized yet, and they remain short-term range bound with more selling pressure as a distinct possibility. While the worst appears over on a very short-term basis, the dust hasn't settled just yet.