Celebrating Santa Challenge As Over

S&P 500 bulls stood their ground nicely, and the key sectors confirmed little willingness to turn the very short-term outlook more bearish than fits the little flag we‘re trading in currently – it‘s a bullish flag. Given the continued risk-off turn in bonds, the stock market setback could have been more than a tad deeper – that would be the conclusion at first glance. However, high yield corporate bonds held up much better than quality debt instruments, and that means the superficial look would have been misleading.

Likewise as regards my other 2 signs out of the 3 yesterday presented ones – tech held up fine, and cryptos have practically erased yesterday‘s hesitation during today‘s premarket. The Santa Claus rally indeed hasn‘t yet run its course, and the slightly better than a coin toss odds of us not facing more than a very shallow correction, look to be materializing.

As I wrote 2 days ago – What‘s Not to Love Here – we‘re entering 2022 with great open profits in both S&P 500 (entered aggressively at 4,672) and crude oil (entered with full force at $67.60). Both rides aren‘t yet over, copper is primed to catch up in the short run to the other commodities, gold is well bid at current levels, and together with silver waiting for a Fed misstep (market risk reappreciation) and inflation to start biting still some more while the real economy undergoes a soft patch (note however the very solid manufacturing data) with global liquidity remaining constrained even though the Fed didn‘t exactly taper much in Dec, and nominal yields taking a cautious and slow path towards my 2022 year end target of 1.80-2.00% on the 10-year Treasury.

As I wrote prior Monday, we‘re looking at still positive 2022 returns in stocks – of course, joined by commodities and precious metals. The path would be though probably a more turbulent one than was the case in 2021.

We had a good year of strong gains, and I hope you have benefited. Thank you for all your appreciation and best wishes sent my way throughout all of 2021 and now by email or via Twitter – I would love to wish you a very Happy New Year – may 2022 keep bringing you happiness, success and good health. Enjoy the New Year‘s Eve celebrations, and see you again on Jan 03, 2022!

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

S&P 500 and Nasdaq Outlook

S&P 500 and Nasdaq

S&P 500 consolidation is still shaping up finely – and does so on solid internals. Particularly the tech resilience is a good omen.

Credit Markets

HYG, LQD and TLT

HYG could have indeed declined some more, but didn‘t. While I‘m not reading all too much into this signal individually, it fits the (still bullish) mosaic completed by other markets on my watch. That‘s the strength of intermarket analysis.

Gold, Silver and Miners

gold, silver and miners

Gold and silver got on the defensive, but the bears didn‘t get too far – and the chance they could have, wasn‘t too bad. Rising yields were though countered by the declining dollar.

Crude Oil

crude oil

Crude oil is likely to pause today and will rally again once risk-on returns broadly, including into credit markets. For now, backing and filling above $76 is my leading very short-term scenario – Monday though will be a fresh day.

Copper

copper

Copper is pausing, but the downswing didn‘t reach far and was bought relatively fast. More consolidation above $4.40 looks likely, and it would come with a generally bullish bias that‘s apt to surprise on the upside. Similar to precious metals though, patience.

Bitcoin and Ethereum

Bitcoin and Ethereum

Bitcoin and Ethereum are staging a daily comeback, and as long as mid-Dec lows don‘t come in sight again, crypto prices can muddle through with a gently bullish bias.

Summary

Santa Claus isn‘t willing to give much ground, and the table is set for this nice rally to modestly continue today – somewhere more pronouncedly (S&P 500, cryptos) than elsewhere (commodities and precious metals). I‘m still looking for a positive first day of 2022 trading to help make up for end of this week‘s headwinds – it has been great that the bears couldn‘t find more strength yesterday.

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Disclaimer: All essays, ...

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