Risk On Is Back

S&P 500 decline was at odds with the credit markets doing fine yesterday – it looks to me the bears mustered all the strength they could. And that wasn‘t too much really – this week‘s woes look to be over, and VIX ready to decline once again, which means that both tech and value can look forward for higher prices.

Keeping in mind yesterday‘s big picture:

(…) did you notice the degree of bearishness that such a measly downswing elicited? Given where the Fed and Treasury are in monetary and spending plans, nothing has changed – the debt ceiling drama is still out of the markets‘ focus alongside pretty much everything else including Evergrande and similar fears. Who could have forgotten the late Jan GameStop, or then Archegos? And the markets keep rising on the staircase liquidity wave interrupted by a fresh stimulus here and there:

I‘m looking for a solid close across the paper and real assets, and for cryptos to join in next week. As for precious metals, the basing continues – but the miners to gold ratio (HUI:GOLD) isn‘t breaking to new lows. Gold and silver are waiting for the right catalyst, the downside is limited, and outshined by the upside potential.

Anyway, time to lock in significant open profits in oil and copper while letting them grow!

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

S&P 500 and Nasdaq Outlook

S&P 500 and Nasdaq

The S&P 500 downswing appears stronger than it internally is at the moment – we have likely seen the lows for quite a few trading sessions ahead.

Credit Markets

HYG, LQD and TLT

Credit market continues turning up, and this is the most encouraging element for me in looking for a full-fledged return to risk-on.

Gold, Silver and Miners

gold, HUI and TIPS

Gold and silver are stable in the very short run, and can surprise on the upside – yesterday‘s stabilization is merely a starting point. As real rates go more negative, look for attention to shift to this tailwind for higher precious metals prices.

Crude Oil

crude oil

Crude oil confirmed how volatile it can be as the U.S. inventories report facilitated selling, but the high volume hints at accumulation. I continue leaning bullish.

Copper

copper

Copper and CRB Index exchanged directions yesterday, and I am looking for a good day in both later today – even if in the context of real economy deceleration.

Bitcoin and Ethereum

Bitcoin and Ethereum

Bitcoin and Ethereum are modestly down today, but not breaking down. The serious upswing attempt looks to have to wait for next week.

Summary

Risk-on is likely to gain the upper hand shortly as yet another weak selling wave is drawing to its end. Crucially, the dollar is rolling over, and that bodes well for both real and paper assets.

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Disclaimer: All essays, ...

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