S&P 500 delivered the upswing bonds were tipping it to do since late last week, as per my weekend analysis released as promised yesterday.

(…) Look not just at corporate bonds that keep showing greater resilience than the higher for longer mantra would imply – both in 2024, and even when only Thursday and Friday reaction to opposing macroeconomic data is considered (look at the unwillingness to sell the stagflationary data hard as daily volume reveals). USD failure to rally much deserves equal attention.

The same conclusion of what kind of a move S&P 500 is setting up to, is confirmed by precious metals with gold and silver merely pausing Friday – not reversing. Look at the sectors leading the S&P 500 advance – I talked lately that it would be financials (and industrials) leading the next upleg, and see how well they are seconded by consumer staples and utilities. All of these smack of increasing focus on cash flow valuation in a declining rates environment.

This is nowhere better seen than in the TLT daily candles Thursday and Friday, with the lack of daily volume behind the sellers.

Therefore I think that Monday would be a trappy, little volatile day, and neither Tuesday before PPI would be a hard down day. Just enough sideways to a little down perhaps to create confusion before the PPI aftermath turns into a springboard as the Fed would even more so Wednesday see building the case for (again promising) a rate cut withour totally destroing its credibility (job market can justify a projected cut when inflation data don‘t come in raging hot). As an added benefit, that would help bolster the dismal consumer perceptions as revealed Friday.

Yesterday changed the financial landscape in bringing rate cuts closer, with Sep being the mainstream bet now ((no cuts by Sep fell to merely 25% odds from 35% the day or week before) – it‘s not an issue that Russell 2000 hasn‘t traveled that far yesterday. 10y yield at 4.34% and 2y at 4.74 with USD declining to 200-day moving average, that‘s what counts in propelling stocks and precious metals, my key most rewarding plays, higher.

S&P 500 and Nasdaq

(Click on image to enlarge)

In such a strong macroeconomic driven move, it‘s pointless to call out the resistances that fell – for today, 5,320s at worst, and low 5,330s at best, must be considered as supports.

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