Stocks Bulls Can Take A Rest – But Gold Ones Can‘t

The daily banging on the 3,900 threshold shows in yesterday‘s upper knot, and this milestone has very good chances of being conquered today. More important than the exact timing though, are the internals marking the setup – we‘ve indeed progressed very far into this correction. While not historically among the longest ones, it‘s still getting long in the tooth – just as I was writing throughout the week.

And it is getting stale, even if I look at the star non-confirmation, the high yield corporate bonds. A relatively modest daily upswing, outshined by investment-grade corporate bonds. Yes, the credit markets are calming down, and the tiny daily long-term Treasuries upswing doesn‘t reflect that fully just yet. Besides giving breathing room to defensives such as utilities and consumer staples, it‘s also very conducive to the precious metals sector.

Copper, oil or agrifoods aren‘t flashing warning signs either – this is a healthy consolidation of steep prior gains as the dollar is getting again under pressure on retreating yields. Just as stocks are undergoing a larger rotation in favor of high beta value plays (financials and manufacturing ones are doing great, airlines jumped), the leaders out of the corona deflationary crash are leading no longer (technology). The picture of the unfolding reflationary recovery is a healthy one as rates are rising on account of improving the economic environment, and inflation doesn‘t really bite yet.

The ideal environment for the stock market to do well (hello my profitable open position), and for commodities to do really well. While the Fed is prepping the markets for (temporary, they say) higher inflation readings, gold didn‘t react too bullishly to yesterday‘s mildly positive CPI data – just wait for PPI data which would reflect the surging commodity prices more adequately. At the moment, evaluating the strength and internals of precious metals rebound is the way to go as we might very well have seen the gold bottom, with the timid $1,670 zone test being all the bears could muster. Time and my dutiful reporting will tell.

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Monica Kingsley 1 month ago Author's comment

SPX within sight of all time highs, and the tech didn't retreat an inch today. In the meantime, value stocks keep gently reaching hgiher, HYG got its act together - the bulls decided not to rest, and go for new highs in one day. More power and profits to the bulls!

Gold just can't keep above $1,730 today, and revisits the low $1,720s. Despite weakening USD and half of intradays TLT losses erased, the miners to gold ratio is running into headwinds again. Looking at silver and SIL, I am not writing off the unfolding rebound just yet, though.

Good evening everyone!!

Monica Kingsley 1 month ago Author's comment

Okay, no rest for stock market bulls as the 3,900 will be convincingly cleared today, in line with my opening sentence.

But gold bulls have a tad complicated their position with the retreat from premarket highs - they better refuse trading at the $1,720 volume profile zone that is still acting as a magnet, and surge higher if they are earnest. At least GDX is kind of behaving today so far - but no model of strength either.

Good day everyone!