Wednesday closed with an elongated profile structure, offering limited directional clarity. However, volume dynamics point to short covering near the lows, and the overnight session broke above value, supporting a modest bullish bias for today’s trade.

The 6,974 level remains central to the plan, with traders likely to add to core longs around the developing VWAP.
 

Commodities continue to strengthen. Gold, silver, and copper are pushing higher amid the familiar growth-and-inflation risk mix highlighted in recent commentary. This week’s inflation data added little clarity to the rate-cut trajectory. While CPI was inconclusive, Wednesday’s PPI showed a November uptick and firmer-than-expected year-over-year prints, reinforcing the risk of a prolonged rate-cut pause, an initial headwind for equities.

Geopolitical headlines offered temporary relief. Reports suggesting a delay in potential action involving Iran helped spark an overnight rebound from the lows, though underlying risks remain unresolved.

From a flows perspective, weekly performance shows capital rotating into small caps and emerging markets, a supportive backdrop for U.S. equities, including the S&P 500. Bitcoin’s roughly 6.4% weekly gain reinforces a broader risk-on tone, suggesting the equity melt-up may not be over. Copper’s strength (“Dr. Copper”) continues to signal economic resilience, while elevated crude prices feed into inflation hedging demand, benefiting gold.

Volatility is edging higher, reflecting persistent uncertainty around a possible January rate-cut hold. This is echoed in interest-rate futures and rising yields. Credit markets, however, remain constructive, with TIPS elevated, still consistent with a broader risk-on environment.

Bottom line: Sentiment leans bullish, supported by flows, commodities, and crypto, but markets are increasingly pricing the risk of a near-term pause in rate cuts. An additional variable to monitor is Japan, where rising yields and potential rate hikes tied to a weaker yen could favor domestic investment over U.S. equities, posing a forward-curve risk.

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