S&P 500 bears couldn‘t follow through, and the bond market downswing looks tired – starting off a risk-on base, never quite flipping risk-off. Perhaps best of all, tech saved its bullets and is ready to join when TLT comes back and erases Friday‘s modest decline on low volume. The usual „suspects“ continue doing well – energy, healthcare, consumer staples, materials, and industrials – best picks for what‘s to come in the remaining part of this rally.

It can and still will go on – all the mixed Fed messaging in the prior week won‘t stop it, signs of decelerating inflation would continue popping up (to accompany PPI) while speculation would continue as to when exactly would a recession arrive. Approaching, not yet here except for housing, manufacturing, etc that feel the pain already – remember, the job market is the last to roll over (non-farm payrolls – unemployment claims are actually leading). The gyrating bets on Fed taking its foot off the pedal, are the ingredient that can power stocks higher before earnings start to bite next year.

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

S&P 500 and Nasdaq Outlook

The fake breakdown was indeed the result of what I wrote here Friday morning. 4,000 are on the chopping block this week.
 

Credit Markets

For now, both the retreat in yields and the general risk-on posture in bonds can continue. Still, a lot of institutional money is on the sidelines that need to be invested before year-end – both in stocks and bonds.
 

Gold, Silver, and Miners

This doesn‘t look like the end of a major countertrend rally – higher highs have been made while fresh lows… not exactly. The tide has turned, and precious metals would focus increasingly more on the high debt servicing costs in anticipation of yet another Fed turn (in support of the economy and fiscal deficits that would grow during recessions) no matter whether 5% or 5.50% Fed funds rate is reached after Mar FOMC – see how little decline happened from Jul lows and where rates were back then.

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