Still No S&P 500 Correction, Still No Real Change In The Metals

Yesterday‘s thin volume session didn‘t bring any material changes as the window of opportunity for the stock bears to act, is slowly but surely closing down. Friday‘s intraday move brought increasingly higher prices, and Monday‘s trading extended gains even more. Euphoric, complacent greed as evidenced by the sentiment readings and put/call ratios, is on.

I asked on Friday:

(…) How long can it last, and what shape the upcoming correction would have? Right now, the warning signs are mounting, yet the bears shouldn‘t put all their eggs into the correction basket really, for it shapes to be a shallow one – one in time, rather than in price.

Both on Monday and today, I‘ll say that waiting for a correction is like waiting for Godot. Right from the horse‘s mouth as my personal experience with quite some absurd and Kafkaesque drama got richer recently.

The dollar keeps topping out, which I called it to do a week ago – and its losses have been mounting since. Long-dated Treasury yields are rising in tandem, which is a great environment for financials (XLF ETF) and emerging markets (EEM ETF). The former benefit from the widening yield curve, the latter from plain devaluation.

Gold performance is still short-term disappointing, and silver and platinum are leading. But it‘s the miners and the moves between various mining indices, that work to soothe the bulls‘ impatience. Understandable as we are in 5+ months of downside correction whose target I called on Aug 07 in the article S&P 500 Bulls Meet Non-Farm Payrolls, witnessing record pace of new money creation.

The ongoing economic recovery will get new stimulus support, and that will work to broaden the precious metals advance. Commodity prices are universally rising, and over time, inflation as measured by CPI will do so too. But not until the current pace of job creation picks up and participation rate turns – we‘re far from that moment. Until then, inflation will be apparent only in (financial) asset prices, which is in line with new money no longer sitting on banks‘ balance sheets, but flowing into the real economy.

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Monica Kingsley 2 weeks ago Author's comment

Let's comment on the up-to-date developments. The morning rebound in both gold and silver has given way to renewed selling, but are the bears, with USDX up 0.21 as we speak, having the upper hand really? Do any historical parallels compare to the unprecedented policy mix of 2020-2021? Gold is shaking off the rising Treasury yields pressure, slowly but still & miners internal dynamics tell the story of silver and platinum still leading the pack. A daily setback a la Feb 04 doesn't usher in a crash really. Let's stay objective!