Profiting From Financial Stress Abating

Powell didn‘t disappoint… Wall Street, that is. The hazy taper silhouette remains just that, and his speech brought more implicit assurances that any dreaded hawkish turn, which was what the markets were clearly fearing given the jubilee thereafter. Practically everything caught a spark – tech, value, amazingly smallcaps, silver, gold, copper, a little lagging oil. It‘ll take a while for the currently undervalued emerging markets to catch up – look for that to happen once the dollar bids farewell to its trading range (it looks getting ready to test its lower border, in due time).

Credit market spreads haven‘t yet decidedly turned, but it‘s my view they‘re in the process of doing so, in confirmation of the medium-term risk-on turn. The 10-year to 2-year, or to 3-month, all signal that the financial stress of recent weeks is abating. While stocks went sideways, commodities took it on the chin while precious metals and cryptos stood kind of in between. September taper surpise appears banished, so look for more of Friday‘s dynamic to have the upper hand.

The leading indicators‘ slowdown, strained supply chains and need for replenishment of investories almost across the board, is though set to carry the bull markets ahead – as stated in Friday‘s extensive analysis, Fed isn‘t interested in pulling the rug from beneath. It‘s still more about sweet sugar than bitter medicine, so look for the reasonably loose monetary conditions to continue. Reasonably – what‘s that, is always in the eye of the beholder.

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

S&P 500 and Nasdaq Outlook

S&P 500 and Nasdaq

Stocks welcomed the pleasantly dovish tone with open arms – path of least resistance remains sideways to up no matter the distance from the 50-day moving average.

Credit Markets

HYG, LQD and TLT

Credit markets got back behind the stock market upswing, and while the quality debt instruments are underperforming, the benefit of the doubt remains with the bulls.

Gold, Silver and Miners

gold, HUI and TIPS

Gold, silver and miners are catching up in the risk-on moves, as immediate monetary policy uncertainty is removed, and remain primed for more gains.

Crude Oil

crude oil

Crude oil bulls dutifully stepped in, but the upswing wavered a little. Neither the volume was stellar, but prices are likely to trade up over the next few days. I‘m a bit on guard though as consolidation around $68 may continue beforehand.

Copper

copper

Copper participated in the risk-on moves more vigorously than oil, and looks likely to leave the 50-day moving average in the dust before the week is over.

Bitcoin and Ethereum

Bitcoin and Ethereum

Cryptos keep on consolidating, base building, making mostly higher highs and higher lows. It appears only a question of time before the fresh upleg comes.

Summary

Risk-on traders had a field day on Friday, and are well positioned to extend gains over this week. Jackson Hole didn‘t bring any curveballs, and Powell made sure that smooth sailing ahead is in our immediate future.

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