No Upsetting The Apple Cart In Stocks Or Gold

So, another volatility spike has been banished, but option traders aren‘t yet satisfied, and keep piling into protective instruments. I view this as a fuel of the upcoming rally continuation, unless the tech‘s earnings batch doesn‘t disappoint as Netflix subscriber base growth did.

One more argument in favor of the S&P 500 upswing, comes from the smallcaps – the time of their outperformance, is approaching. Likewise emerging markets are starting to do better, and the dollar effect is part of the explanation.

Gold took sensitively to the rise in yields, and retreating dollar didn‘t lift it up really. The yellow metal disregarded proportional increase in inflation expectations, and so did the miners – indicating that a brief soft patch in the precious metals sector can‘t be excluded. This doesn‘t change my Friday‘s thoughts that:

(…) The precious metals upleg has started, we‘re in a real assets super bull market, and this little hiccup won‘t derail it. The sad implication would actually drive it as capital formation would be hampered, unproductive behaviors encouraged, and potential output lowered.

Pretty serious consequences – add to which inflation as that‘s what the Fed ultimately wants, and the recipe for more people falling into higher tax brackets through illusory gains, is set. Then, as inflation starts firing on all cylinders – a 2022-3 story when the job market starts overheating – the pain would be felt more keenly.

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

S&P 500 Outlook

S&P 500

It‘s not an issue that the two latest upswings happened on decreasing volume as I view the preceding modest volume spike as a sign of weak selling turning into accumulation. There is plenty of doubt to drive further S&P 500 gains.

Credit Markets

HYG, LQD and TLT

Both high yield corporate bonds to short-term Treasuries (HYG ETF) and investment grade ones (LQD ETF) have risen on Friday, and the divergence to long-dated Treasuries is another key factor driving the risk-on return conclusion.

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