S&P 500 wavered but is bound to get its act together in the medium term. Powell‘s statements shouldn‘t have stunned the bulls, but they did – the mere reiteration of the tightening plans coupled with remarks on the need to stamp out aggressive inflation before it‘s too late (anchored inflation expectations, anyone? I talked that in the run-up to the Sep 2021 P&G price hikes and how the competition would be following in a nod to high input costs, with heating job market on top of the commodities pressure pinching back then already), sent stocks and bonds down.

Add the recession fears that were assuaged during Wednesday‘s conference, and you get the S&P 500 bulls having to dust off after Monday‘s setback. Given how early we‘re in the tightening cycle, and that the real economy isn‘t yet breaking down no matter what‘s in the pipeline geopolitically as regards various consequences to commodities, goods, services, and money flows, the stock market bulls are still likely to take on the 4,600 as discussed already.

Only this time, the upswing would be accompanied by a more measured and balanced commodities upswing, joined in by precious metals. Great profits ahead and already in the making.

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

S&P 500 and Nasdaq Outlook

S&P 500 is consolidating above 4,400, and the relative strength in value as opposed to tech, is boding well – the bulls are pushing their luck a bit too hard as a further TLT decline would pressure growth stocks.

Credit Markets

HYG is getting under pressure again, but its decline would be uneven in the short run – as in I‘m looking for quite some back and forth action. First, higher in taking on yesterday‘s selling.

Gold, Silver, and Miners

Precious metals aren‘t turning lower in earnest – the miners‘ leadership bodes well for further gains and is actually a very good performance given the hawkish Fed „surprise“ (surprise that wasn‘t, shouldn‘t have been).

Crude Oil

Crude oil strength returning is a very good omen for commodities bulls broadly, and the rising volume hints at the return of bullish spirits. The upswing is far from overlooking how far black gold got on relatively little conviction, and where oil stocks trade at the moment.

Copper

Copper is acting strongly, and the downswing didn‘t entice the bears much. The path of least resistance remains higher, and the red metal isn‘t yet outperforming the CRB Index. A great pick for portfolio gains with as little volatility as can be.

Bitcoin and Ethereum

Bitcoin went on to recover the weekend setback – Ethereum upswing presaged that. They‘re both a little stalling now, but entering today‘s regular session on a constructive note. I‘m looking for a modest gains extension.

Summary

S&P 500 is bound to recover from yesterday‘s intraday setback – the animal spirits and positive seasonality are there to overcome the brief realization that the Fed talks seriously about tightening and entrenched inflation. While not even the implied readiness to hike by 50bp here and there won‘t cut it and send inflation to the woodshed, let alone inflation expectations, the recession fears would be the next powerful ally of stock market bears. For now, though, we‘re muddling through generally higher (I‘m still looking for a tradable consolidation of last week‘s sharp gains), and will do so over the coming several weeks. The real profits are to be had in commodities and precious metals, as I had been saying quite often lately… Enjoy!