S&P 500 withstood the initial selling even if bonds didn‘t favor that at all, and real assets weren‘t taking the wobbling USD cue. Monday‘s strong rotations quickly overcame the 4,330 level in Jun futures, all powered by the three top sectors (tech, communications, discretionaries) that were joined by industrials, materials, retail, transportation, and smallcaps to varying degrees.

But the improvements in market breadth weren‘t unequivocally strong as I‘m not sure how long (in terms of weeks) the former sectors coming back to life can support the 500-strong index once tech FOMO runs out of steam and profit-taking comes on account of core inflation not really retreating much with the Fed tightening aftermath. This would keep pressure on the Fed to not only remain tight in terms of rate hikes but to focus on shrinking its balance sheet (withdrawal liquidity-generated froth) more seriously.

Any undoing of the 3-week liquidity spree in spring would, of course, mean fresh bank stress, and a proper recession arriving faster than the notoriously overestimating job market data near the tops suggest before getting downgraded in the months ahead. Surging tech with not-so-strong underlying revenue and profits across the board would face more bond market pressure.

Remember the Sunday described key upcoming drivers of stock market downsiwng – acknowledgment there‘s no avoiding recession and the associated forward earnings revision need.

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

S&P 500 and Nasdaq Outlook

Core inflation didn‘t really retreat while headline did by 0.1% – the news has been bought premarket – neither ES nor NDX wavered. The Sep contract can see 4,410 tested in the regular session, and Jun contract 4,370 likewise. Today doesn‘t appear likely to bring a tech setback (sell the news after the opening bell is unlikely with any large magnitude), and bonds with utilities are key to watch for interest rates direction next – that‘s where the pressure on Big Tech would come from ultimately. Not today though – the grind up goes on
 

Gold, Silver, and Miners

PMs would join in today‘s ES and copper with even oil upswing, yet gold would relatively lag. The correction hasn‘t yet run its course in time.
 

Crude Oil

Crude oil will keep the intraday gains, yet it‘s tough to see how this week brings prices above $72 – $73 area – the tide hasn‘t yet turned even if copper defends $3.72.

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