EC Fabled September Storms

S&P 500 faded the opening upswing, breaking below Monday‘s lows. High yield corporate bonds didn‘t surprise by at least closing unchanged, and neither did the quality debt instrument facilitate an upswing within tech or interest rate sensitive sectors such as utilities. In spite of the solid potential for an intraday rally attempt that could take stocks closer to 4500 again, none materialized.

The bears are taking a breather as evidenced by the VIX rejecting the upside move – but the volatility metric doesn‘t appear yet ready to roll over to the downside either. While the (mistaken) notion of cooling down CPI could have pushed stocks a little higher, markets appear more focused on the decelerating real economy, on the almost stagflationary atmosphere that‘s going to have stocks in its grip for the remainder of 2021:

(…) CPI coming in neither too hot, nor too cold, would be in line with my recent expectations of inflation becoming entrenched and elevated. Still, the figures support the transitory notion to a degree – the markets are obviously afraid of high inflation forcing Fed‘s mistake, and any reading that won‘t light the immediate inflation fires, would be considered good for the risk-on assets. More so probably for real ones as opposed to stocks. Finally, more time for the Fed to act implies better possibilities for precious metals bulls.

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

S&P 500 and Nasdaq Outlook

S&P 500 and Nasdaq

The bears retook initiative, making quite the progress when the sectoral view is engaged. It doesn‘t mean though that sentiment can‘t flip bullish at short notice, except that there is none at the moment.

Credit Markets

HYG, LQD and TLT

Credit markets turned risk-off, and unless HYG kicks in again, the stock market bulls can‘t think about crossing back above 4,500.

Gold, Silver and Miners

gold, HUI and TLT

Gold embraced the retreating yields and wavering dollar, followed by miners and silver. The heavier than usual volume shows accumulation, but the bulls better arm themselves with patience.

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Adam Reynolds 5 days ago Member's comment

Good read, thanks.

Monica Kingsley 5 days ago Author's comment

Thank you very much Adam, I'm glad you enjoyed it!