Smallcaps

Stock bulls aren‘t wavering, and the upswing continues without a pause. Is the move (still) in balance with the relevant markets as one catches up to the other, or is a digestion of prior sharp gains nearby? It didn‘t come earlier this week, and in today‘s article, I‘ll lay down the rising probabilities of seeing at least a short-term pause in the stellar pace of gains since Monday. Gold pause gave way to selling pressure yesterday, spurred to a degree by the post-Monday‘s trading action. As both metals declined by around 2.5%, this move probably appears overdone to more than a few. Me included, as I called it a kneejerk reaction before yesterday‘s close. In today‘s analysis, I‘ll demonstrate why precious metals investors shouldn‘t be afraid of a trend change – none is happening. Let‘s dive into the charts (all courtesy of www.stockcharts.com). S&P 500 Outlook Stocks continue higher without stopping, and the daily volume rose a little. The bulls are strong, and took prices almost to the upper Bollinger Bands border amid positive moves in CCI and Stochastics. The daily of daily increases looks set to slow down as minimum though – starting today. Credit Markets High yield corporate bonds (HYG ETF) are still pushing higher. While I ignored Tuesday‘s and Wednesday‘s upper knot, yesterday‘s one is arguably a more respectable one, and that‘s because of the drying volume. It wouldn‘t be unimaginable to experience HYG to pause shortly, which would support my prior assessment about SPX. High yield corporate bonds to short-term Treasuries (HYG:SHY) ratio with S&P 500 overlaid (black line) shows that the two are tracking each other tightly in recent days. Actually, stocks are reaching for the leadership position, which given their performance since the start of November is very short-term suspect (stocks have lagged a little relative to the credit markets, and now they‘re trying to lead). That‘s yet another reason why to be cautious about (at least today‘s) trading – and for all the coming days, you know now where to find my daily analyses. Russell 2000 and S&P 500 Smallcaps aren‘t weakening vs. the 500-strong index in the least, which means that the stock bull market continues unabated. It also disproves the recent significant correction ahead calls on the internet that aren‘t hard to come by. Here we are after Friday‘s bloodbath that I called as out of whack with the internals, here we are at new index highs, this soon. In yesterday‘s analysis, I presented the value to growth ratio‘s message of the rotation from tech into value as value having to try once again. Technology (XLK ETF) had a strong week, so let‘s inspect its performance vs. the smallcaps – see the above chart. It shows that the Russell 2000 (IWM ETF) has carved a nice, almost rounded bottom, and is primed for higher values ahead, which also supports the notion of no stock market top ahead. Gold in the Spotlight The yellow metal is attempting to stage a recovery – a modest one thus far as it has been rejected at $1810 earlier. How disappointing is that? We‘ll see at the closing bell (my assumption is that the bulls will prevail today comfortably), but the implications of the moves thus far doesn‘t change my thesis of a break higher from the 5-month long consolidation in the least. It‘s that the technical (not to mention fundamental) factors propelling it higher, are still in place. The caption says it all – we‘re in the closing stages of the prolonged consolidation, and prices will rebound next, as so many preceding sizable red candles had trouble attracting follow through selling, and yesterday‘s candle is in a technically even more difficult position to achieve that. The moving averages aren‘t seriously declining, and I look for the death cross (50-day moving average puncturing the 200-day one) to fail relatively shortly. The Force index in gold agrees that we aren‘t seeing a really serious push to the downside here. Look at the start of 2021, how deep it went back then – we‘ll carve out a nice bullish divergence as I look for gold to get serious about turning up. Yes, the Force index won‘t decline as low as in early January. Silver didn‘t yield all that much ground as the short squeeze got squeezed. The chart is still bullish, and I stand by the calls mentioned in the caption here – a great future ahead for the white metal in 1H 2021 and beyond. Ratios and Miners The gold to silver ratio also continues favoring the white metal, whose this week‘s retreat (post-Monday) didn‘t affect the downward trending values in the least. The miners to gold ratio continues supporting my call of breakdown invalidation leading to a new precious metals upleg. I made the calls along these lines both on Tuesday and prior Monday, when I featured my 2021 prognotications on stocks, gold, dollar and Bitcoin – please do check them if you hadn‘t done so already. Senior gold miners (GDX ETF) are taking a back seat to juniors (GDXJ ETF), andthat‘s a hallmark of bullish spirits returning – first below the surface, then very apparently. While we have to wait for the latter, its preconditions are here. Summary The stock market keeps powering higher, and despite the rather clear skies ahead, a bit of short-term caution given the speed of the recovery and its internals presented, is in place even as the stock bull run shows zero signs of having topped. It‘s time for the gold and silver bulls to reappear after yesterday‘s outsized setback. Crucially, it hasn‘t flipped the short- and medium-term outlook bearish as the factors powering the precious metals bull run, are in place. Thank you for having read today‘s free analysis, which is available in full at my homesite. There, you can subscribe to the free Monica‘s Insider Club, which features real-time trade calls and intraday updates for both Stock Trading Signals and Gold Trading Signals. Thank you, Monica Kingsley Stock Trading Signals Gold Trading Signals www.monicakingsley.comk@monicakingsley.co * * * * * All essays, research and information represent analyses and opinions of Monica Kingsley that are based on available and latest data. Despite careful research and best efforts, it may prove wrong and be subject to change with or without notice. Monica Kingsley does not guarantee the accuracy or thoroughness of the data or information reported. Her content serves educational purposes and should not be relied upon as advice or construed as providing recommendations of any kind. Futures, stocks and options are financial instruments not suitable for every investor. Please be advised that you invest at your own risk. Monica Kingsley is not a Registered Securities Advisor. By reading her writings, you agree that she will not be held responsible or liable for any decisions you make. Investing, trading and speculating in financial markets may involve high risk of loss. Monica Kingsley may have a short or long position in any securities, including those mentioned in her writings, and may make additional purchases and/or sales of those securities without notice.

Both the upside and downside in stocks appears limited as these keep cooling off not far away from recent highs. Yesterday‘s session sent us a telling signal that the bears might wake up from their stupor briefly. Largely though, all remains well in the S&P 500 land. The anticipated gold rebound is underway, and the significant upper knot of yesterday‘s session isn‘t concerning – gold is not rolling over to the downside here. Let alone silver. I view yesterday‘s trading as consistent with a daily pause within an unfolding uptrend. My open long position is growingly profitable, and I‘ve covered the bullish case in detail both on Monday and Tuesday. Today‘s analysis will strengthen the story even more. Given the dollar performance, I can‘t underline enough the importance of what we‘re witnessing – let‘s move to my Monday‘s dollar observations, which are silently marking the turning point I called for, directly relevant to precious metals: (…) The weak non-farm employment data certainly helped, sending the dollar bulls packing. It‘s my view that we‘re on the way to making another dollar top, after which much lower greenback values would follow. Given the currently still prevailing negative correlation between the fiat currency and its shiny nemesis, that would also take the short-term pressure of the monetary metal(s). What would you expect given the $1.9T stimulus bill, infrastructure plans of similar price tag, and the 2020 debt to GDP oh so solidly over 108%? Inflation is roaring – red hot copper, base metals, corn, soybeans, lumber and oil, and Treasury holders are demanding higher yields especially on the long end (we‘re getting started here too). Apart from the key currency ingredient, I‘ll present today more than a few good reasons for the precious metals bull to come roaring back with vengeance before too long. Finally, I‘ll bring you uranimum market analysis today as well. By popular demand, I‘ll dive into the commodity and its miners. You know already that my focus goes much further than the key topic of these analyses (stocks and precious metals). I am regularly covering oil, commodities and currencies too – just check out my trading story if you hadn‘t done so already. So, let‘s dive into the charts (all courtesy of www.stockcharts.com). S&P 500 Outlook and Its Internals A first day of hesitation into a very strong chart with non-stop gains recently, yet it‘s exactly these moments when the bears might try to raise their heads once again. Just to rock the boat, that‘s all. The Force index is warning that its solid upswing is due a reprieve here in what I perceive to be initial signs of selling into strength. Not too much, but distribution had an upper hand yesterday over accumulation. Credit Markets High yield corporate bonds (HYG ETF) didn‘t perform fine yesterday at all. On declining volume, the bulls couldn‘t close above Monday‘s opening prices, which given the post Jan 20 performance doesn‘t bode well for the short term. The steep uptrend simply appears in need of a rest. Smallcaps, Emerging Markets and Oil S&P 500 vs. the overlaid Russell 2000 (black line) isn‘t sending any warning signs of internal weakness when the two are compared. The rising tide is lifting all (stock) boats. Neither the emerging markets (black line) are diverging – the many stock bull markets around the world, they are all doing fine. The oil to gold ratio keeps leaning in favor of oil, just as it‘s expected during an economic recovery, coupled with inflation that‘s lighting fire across commodities. The stock bull isn‘t going down really. Gold & Silver Let‘s overlay the gold chart with silver (black line). My yesterday‘s words are a good fit also today – the disconnect since the Nov low should be pretty obvious, and interpreted the silver bullish way I‘ve been hammering for weeks already. Please also note that the white metal has been outperforming well before any silver squeeze caught everyone‘s attention. The gold to silver ratio sends a similarly clear message – the coming precious metals upleg will be characterized by silver outperforming gold for a variety of reasons beyond the industrial demand and versatility ones. Silver‘s above ground stockpile isn‘t being added to at the same pace as gold‘s is, and its recycling is less feasible practically speaking. Solar panels are but one of the ever hungry industrial applications, making heavy demands on silver reserves. Let‘s overlay the senior gold miners chart with both junior mining stocks (also gold) and silver mining stocks. See the late Nov turning point, where silver miners started outperforming both the gold juniors and gold seniors. That‘s another proof of the precious metals bull waking up. From the Readers‘ Mailbag - Uranium Q: Hi Monica, despite all the dire warnings of $1500 on gold, you seem to be spot on so far. Where do you think uranium might be headed. It looks risky but some say nowhere but up others nowhere but down! A: Thank you very much! That‘s honest analysis, free from fearmongering. I have been very vocal in writing here, on Twitter, and within comments everywhere that hypothetical technical targets divorced from reality (nonsensical) are dangerous to those who take them without a pinch of salt or two. Whenever I turn from a precious metals (or stock market) bull to a more cautious tone, you all my dear readers, will be the first ones to know. Just as now, the technical signs supporting the bullish (PMs) case are appearing increasingly forcefully (hello, dollar), the same way I‘ll present to you the weakening bullish factors whenever their time comes. We are far away from that in both markets, and in oil too (you‘ll hear me cover that one more often as well). Uranium was hit pretty hard with the Fukushima disaster of 2011 that brought about a long bear market. In 2016, a bottom was reached, and the commodity is slowly but surely on the mend. No spectacular gains, but modest positive returns that not even coronavirus managed to bring down. The same though couldn‘t be said about uranium miners as the below chart shows. Having taken a plunge, they‘ve recovered with the veracity of Bitcoin (called right in my first 2021 analysis), outperforming uranium as a commodity greatly. Still, these remain considerably below their 2011 highs (over $105), and given the energy mix and policies, I am clearly on the bullish side of the uranium opinion spectrum. Summary The stock market keeps holding gained ground, but regardless of the rather clear skies ahead, a bit of short-term caution is called for given the weakening credit markets, which may prove to be very temporary indeed. Expect any correction to be relatively shallow – and new highs to follow, for we‘re far away from a top. The gold and silver bulls are consolidating gains amid their return, and the bullish case for precious metals is growing stronger day by day. Crucially, it‘s not about the dollar here, but about the sectoral internals, and decoupling from rising Treasury yields. The new upleg is knocking on the door, and patience will be rewarded with stellar gains. Thank you for having read today‘s free analysis, which is available in full at my homesite. There, you can subscribe to the free Monica‘s Insider Club, which features real-time trade calls and intraday updates for both Stock Trading Signals and Gold Trading Signals.

None of Friday‘s intraday attempts to recapture 3,850 stuck, and the last hour‘s selling pressure is an ill omen. Especially since it was accompanied by high yield corporate bondsh weakening. It‘s as if the markets only now noticed the surging long-end Treasury yields, declining steeply on Thursday as the 10y Treasury yield made it through 1.50% before retreating. And on Friday, stocks didn‘t trust the intraday reversal higher in 20+ year Treasuries either.Instead, the options traders took the put/call ratio to levels unseen since early Nov. The VIX however doesn‘t reflect the nervousness, having remained near Thursday‘s closing values. Its long lower knot looks encouraging, and the coming few days would decide the shape of this correction which I have not called shallow since Wed‘s suspicious tech upswing. Here we are, the tech has pulled the 500-strong index down, and remains perched in a precarious position. Could have rebounded, didn‘t – instead showing that its risk-on (high beta) segments such as semiconductors, are ready to do well regardless.That‘s the same about any high beta sector or stock such as financials – these tend to do well in rising rates environments. Regardless of any coming stabilization / retreat in long-term Treasury yields, it‘s my view that we‘re going to have to get used to rising spreads such as 2y over 10y as the long end still steepens. The markets and especially commodities aren‘t buying Fed‘s nonchalant attitude towards inflation. Stocks have felt the tremors, and will keep rising regardless, as it has been historically much higher rates that have caused serious issues (think 4% in 10y Treasuries).In such an environment, the defensives with low volatility and good earnings are getting left behind, as it‘s the top earners in growth, and very risk-on cyclicals that do best. They would be taking the baton from each other, as (micro)rotations mark the stock market bull health – and once tech big names join again, new highs would arrive. Then, the $1.9T stimulus has made it past the House, involves nice stimulus checks, and speculation about an upcoming infrastructure bill remains. Coupled with the avalanche of new Fed money, this is going into the real economy, not sitting on banks‘ balance sheets – and now, the banks will have more incentive to lend out. Margin debt isn‘t contracting, but global liquidity hasn‘t gone pretty much anywhere in February. Coupled with the short-term dollar moves, this is hurting emerging markets more than the U.S. - and based on the global liquidity metrics alone, the S&P 500 is oversold right now – that‘s without the stimulus package. It‘s my view that we‘re experiencing a correction whose shape is soon to be decided, and not a reversal of fortunes.Just like I wrote at the onset of Friday:(…) Would we get a bounce during the U.S. session? It‘s possible to the point of likely. The damage done yesterday though looks to have more than a few brief sessions to run to repair. True, some stocks such as Tesla are at a concerning crossroads, and in general illustrate the vulnerability of non-top tech earners within the industry. Entering Mon‘s regular session, the signs are mixed as there hasn‘t been a clear reversal any way I look at it. Still, this remains one of the dips to be bought in my view – and the signs of it turning around, would be marked by strengthening commodities, and for all these are worth, copper, silver and oil especially.As for gold, it should recover given the retreating long-term yields, but Fri didn‘t bring any signs of strength in the precious metals sector, to put it mildly. Look for TLT for directions, even as real rates, the true determinant, remain little changed and at -1%, which means very favorable fundamentals for the yellow metal. And remember that when the rate of inflation accelerates, rising rates start to bite the yellow metal less.Let‘s move right into the charts (all courtesy of www.stockcharts.com).S&P 500 and Its InternalsFriday‘s session doesn‘t have the many hallmarks of a reversal. Slightly higher volume, yet none of the intraday upswings held. The Force index reveals that the bears just paused for a day, that there wasn‘t a true reversal yet. The accumulation is a very weak one thus far, and the sellers can easily show more determination still.Credit MarketsHigh yield corporate bonds (HYG ETF) are plain and simple worrying here. The decent intraday upswing evaporated as the closing bell approached. A weak session not indicative of a turnaround.The high yield corporate bonds to short-dated Treasuries (HYG:SHY) performance was weaker than the stock market performance, which isn‘t a pleasant development. Should the bond markets keep trading with a more pessimistic bias than stocks, it could become quite fast concerning. As said already, the shape of the correction is being decided these days.Stocks, Smallcaps and Emerging MarketsAfter having moved hand in hand, emerging markets (EEM ETF) have weakened considerably more over the prior week than both the S&P 500 and the Russell 2000 (IWM ETF). EEM is almost at its late Jan lows – given Fri‘s spike, watching the dollar is key, and not just here.TechnologyTechnology (XLK ETF) didn‘t reverse with clarity on Friday, regardless of positive semiconductors (XSD ETF) performance. At least the volume comparison here is positive, and indicates accumulation. Just as I was highlighting the danger for S&P 500 and gold early Thursday, it‘s the tech sector that holds the key to the 500-strong index stabilization.Gold and SilverReal rates are deeply negative, long-dated Treasuries indeed turned higher on Friday, yet gold plunged right to its strong volume profile support zone before recovering a little. Its very short-term performance is disappointing, It was already its Tue performance that I called unconvincing – let alone Wed‘s one. I maintain that it‘s long-dated Treasury yields and the dollar that are holding the greatest sway. Rates should retreat a little from here, and the gold-dollar correlation is only slightly positive now, which translates into a weak positive effect on gold prices.But it‘s silver that I am looking to for earliest signs of reversal – the white metal and its miners have the task clear cut. Weeks ago, I‘ve been noting the low $26 values as sufficient to retrace a reasonable part of prior advance, and we‘ve made it there only this late. Thu and Fri‘s weakness has much to do with the commodities complex, where I wanted still on Thu to see copper reversing intraday (to call it a risk-on reversal), which it didn‘t – and silver suffered the consequences as well. Likewise now, I‘m looking to the red metal, and will explain in today‘s final chart why.Precious Metals RatiosThere is no better illustration of gold‘s weakness than in both miners to gold ratios that are bobbing around their local lows, rebounding soundly, and then breaking them more or less convincingly again. The gold sector doesn‘t yet appear ready to run.Let‘s get the big picture through the copper to oil ratio. Its current 8 months long consolidation has been punctured in the middle with oil turning higher, outperforming the red metal – and that brought the yellow one under pressure increasingly more. Yet is the uptick in buying interest in gold a sign of upcoming stabilization and higher prices in gold that Fri‘s beaten down values indicate? Notably, the copper to oil ratio didn‘t break to new lows – and remains as valuable tool to watch as real, nominal interest rates, and various derivatives such as copper to Treasury yields or this very ratio.SummaryStock bulls are almost inviting selling pressure today with the weak finish to Fri‘s session. While the sectoral comparisons aren‘t disastrous, the credit markets indicate stress ahead just as much as emerging markets do. Still, this isn‘t the end of the bull run, very far from it – new highs are closer than quite a few might think.Gold and silver took an even greater beating on Fri than the day before. Naturally, silver is much better positioned to recapture the higher $27 levels than gold is regarding the $1,800 one. With the long-dated Treasuries stabilization indeed having resulted in a short-term dollar upswing, the greenback chart (and its effects upon the metals) is becoming key to watch these days. Restating the obvious, gold is far from out of the woods, and lacking positive signs of buying power emerging.

Friday‘s session ended in a tie, but it‘s the bears who missed an opportunity to win. Markets however dialed back their doubting of the Fed, which has been apparent in the long-term Treasuries the most. One daily move doesn‘t make a trend change likely though, especially since the Mar pace of TLT decline is on par with Feb‘s and higher than in Jan. While Treasuries paused in early Mar, they‘re now once again as extended vs. their 50-day moving average as before.And that poses a challenge for interest rate sensitive stocks and to some degree also for tech - while I expect value to continue to lead over growth, technology would recover some of the lost ground on rates stabilization. And it‘s true that the $UST10Y move has been a very sharp one, more than tripling from the Aug 2020 lows.Inflation expectations are rising, and so is inflation – PPI under the hood thus far only. Financial assets are rising, perfectly reflected in (this month consolidating) commodity prices. Cost-driven inflation is in our immediate future, not one joined at the hip with job market pressures – that‘s waiting for 2022-3. The story of coming weeks and months is the stimulus avalanche hitting while the Fed still merrily ignores the bond market pressures.And stocks are going to like that – with tech participating, or at least not standing too much in the way, S&P 500 is primed to go to new highs rather shortly. Given the leadership baton being firmly in the hands of value, smallcaps are likely to outperform the 500-strong index over the coming weeks and months. The volatility index is confirming with its general downtrend, commodities, including oil, will be the 2021+ place to be in – just see how fast is Thursday‘s steep correction being reversed. I‘ll be covering black gold more often based on popular demand, so keep your questions and requests coming!The precious metals upswing goes on, and landed the yellow metal comfortably above $1,740. Not too spectacular, but the miners are still painting a bullish picture. I view the increasing appeal of the yellow metal (alongside the bullish sentiment hitting both Wall and Main Street) as part of the inflation trades, as decoupling from rising yields which increased really fast. As gold is arguably the first asset to move in advance of a key policy move, it might be sensing the Fed being forced (i.e. the markets betting against the Fed) to moderate its accomodative policy. Twist, taper – there are many ways short of raising the Fed funds rate that would help put pressure off the sliding long-dated Treasuries, not that these wouldn‘t be susceptible to move higher from oversold levels. And just like the yellow metal frontrunned the Fed before the repo crisis of autumn 2019, we might be seeing the same dynamic today as well.For the cynical and clairvoyant ones, we might sit here in 3-6 months over my notes on „the decoupling that wasn‘t“ - all because rates might snap back from the current almost 1.8% on the 10-year bond.For now, my Friday‘s words remain valid also today:(…) The greatest adjustment is arguably in the inflation projections – what and when is the Fed going to do before inflation raises its ugly head in earnest. There is still time, but the market is transitioning to a higher inflation environment already nonetheless. In moments of uncertainty that hasn‘t yet turned into sell first, ask questions later, let‘s remember the big picture. Plenty of fiscal support is hitting the economy, the Fed is very accomodative, and all the modern monetary theory inspired actions risk overheating the economy later this year. Rates are rising for the good reason of improving economy and its outlook, reflation (economic growth rising faster than inflation and inflation expectations) hasn‘t given way to all out inflation, and stocks with commodities remain in a secular bull market. We‘re in the decade of real assets outperforming paper ones, but that will become apparent only much later into the 2020s.The largely undisturbed rise in commodities got checked yesterday just as stocks did, but the higher timeframe trends (technical and fundamental drivers) hadn‘t changed, which will be apparent once the dust settles.Let‘s move right into the charts (all courtesy of www.stockcharts.com).S&P 500 Outlook and InternalsFriday‘s session on understandably high volume and with some intraday volatility, closed with prices little changed. While the daily indicators are weakening, I see that as a temporary move that would be followed by higher highs in the index.Market breadth indicators are largely constructive, attesting to the broad base of the current S&P 500 advance. Even on little changed days such as Friday, both the advance-decline line and advance-decline volume have risen. I wouldn‘t be concerned with the weak new highs new lows here much as the sectoral structure remains positive – both technology (XLK ETF) and value stocks (VTV ETF) have rejected further intraday declines.Credit MarketsHigh yield corporate bonds have turned higher, and so did their ratio to short-dated Treasuries (HYG:SHY). This is a positive factor for further gains in stock prices.Smallcaps and Emerging MarketsThe Russell 2000 (IWM ETF) isn‘t flashing any warning signs, and continues performing as robustly as the 500-strong index. Given the stage of the bull market we‘re at, smallcaps can be expected to start outperforming at some point in the future, just the same way their underperformance was over since early Nov. As regards emerging markets, their base building accompanied with Friday‘s upswing when faced with rising yields and solid dollar, is encouraging.Gold and SilverThe gold upswing is progressing along, and the daily consolidation in the miners (GDX ETF) isn‘t an issue when compared to a stronger gold performance. Friday was also characterized by a bigger upswing in the junior miners (GDXJ ETF) than in the seniors (GDX ETF), which is positive. The overall impression is of GDX readying a breakout above late Jan and early Feb lows, which bodes well for the precious metals sector as such next – especially given that this decoupling is happening while nominal yields aren‘t truly retreating.Both silver and platinum continue their base building while copper, the key ingredient within the copper to Treasury yields ratio, keeps bullishly consolidating. Silver miners aren‘t sending signals of underperformance, which means that the precious metals upswing dynamics remain still healthy on a closing basis. As regards premarket silver weakness, putting it into context with other markets is key – thus far, it‘s the odd weak one, so I am not jumping to conclusions yet.SummaryS&P 500 trading was undecided on Friday, yet didn‘t bring any clues invalidating the bullish outlook. Volatility remains low, but the put/call ratio has risen, even without a corresponding downswing (or danger of seeing one). The Fed doubting induced pullback appears more than likely in its closing stages.Gold had another resilient week, and the precious metals upswing examination bodes well for the move higher to still continue. Miners are leading, and the yellow metal keeps breaking the spell of higher Treasury yields, supported by copper not yielding ground either.

Put/call ratio didn‘t lie, and the anticipated S&P 500 upswing came on Friday – fireworks till the closing bell. Starting on Thursday, with the rising yields dynamic sending value stocks higher – and this time technology didn‘t stand in the way. What an understatement given the strong Friday sectoral showing, acocmpanied by the defensives swinging higher as well. And that‘s the characterization of the stock market rise – it‘s led by the defensive sectors with value stocks coming in close second now.Still last week, the market confirmed my early Friday‘s take:(…) While it‘s far from full steam ahead, it‘s a welcome sight that the reflation trade dynamic has returned, and that technology isn‘t standing in the way. I think we‘re on the doorstep of another upswing establishing itself, which would be apparent latest Monday. Credit markets support such a conclusion, and so does the premarket turn higher in commodities – yes, I am referring also to yesterday‘s renewed uptick in inflation expectation.Neither running out of control, nor declaring the inflation scare (as some might term it but not me, for I view the markets as transitioning to a higher inflation environment) as over, inflation isn‘t yet strong enough to break the bull run, where both stocks and commodities benefit. It isn‘t yet forcing the Fed‘s hand enough, but look for it to change – we got a slight preview in the recent emergency support withdrawal and taper entertainment talking points, however distant from today‘s situation.Commodities have indeed turned again higher on Friday, as seen in both copper and oil – and so did inflation expectations. While some central banks (hello, Canada) might be ahead in attempting to roll back the emergency support, the Fed isn‘t yet forced by the bond market to act – which I however view as likely to change over the coming months.With 10-year Treasury yields at 1.67%, last week‘s decline didn‘t reach far before turning higher. Remembering stock market woes the first breach of 1.50% caused, stocks have coped well with the subsequent run up – while in the old days of retirees actually being able to live off interest rate income, a level of 4% would bring about trouble for S&P 500, now the level is probably just above 2%. Yes, that‘s how far our financialized economy has progressed – and I look for volatility to rise, and stocks to waver and likely enter a correction at such a bond market juncture. As always, I‘ll be keeping a close eye on the signs, emerging or not, as we approach that yield level.Again quoting my Friday‘s words, what else to expect as the bond markets takes notice:(…) Now, look for the fresh money avalanche, activist fiscal and moterary policy to hit the markets as a tidal wave. Modern monetary theorists‘ dream come true. Unlike during the Great Recession, the newly minted money isn‘t going to go towards repairing banks‘ balance sheets – it‘s going into the financial markets, lifting up asset prices, and over to the real economy. So far, it‘s only PPI that‘s showing signs of inflation in the pipeline – soon to be manifest according to the CPI methodology as well.Any deflation scare in such an environment stands low prospects of success. For deflation to succeed, a stock market crash followed by a depression has to come first. And as inflation is firing on just one cylinder now (asset price inflation not accompanied by labor market pressures), it isn‘t yet strong enough to derail the stock bull run. The true inflation is a 2022-3 story, which is when we would be likely in a full blown financial repression and bond yields capped well above 2% while inflation rate could run at double that figure. Then, the Fed wouldn‘t be engaged in a twist operation, but in yield curve control, which the precious metals would love, for they love low nominal and negative real rates.Gold might be already sensing that upcoming pressure on the Fed to act – remember their run for so many months before the repo crisis of autumn 2019 broke out:(…) After the upswing off the Mar 08 lows faltered, the bears had quite a few chances to ambush this week, yet made no progress. And the longer such inaction draws on, the more it is indicative of the opposite outcome.Not only that gold miners outperformed the yellow metal on Friday, with their position relative to silver, the king of metals is sending a signal that it would be the one to take leadership in the approaching precious metals upswing. And the dollar wouldn‘t be standing in the way – let‘s continue with my Friday‘s thoughts:(…) When I was asked recently over Twitter my opionion on the greenback, I replied that its short-term outlook is bullish now – while I think the world reserve currency would get on the defensive and reach new lows this year still, it could take more than a few weeks for it to form a local top. Once AUD/USD turns higher, that could be among its first signs.Once higher rates challenge the stock market bull, the dollar would do well in whiff of deflationary environment (remember the corona runup of spring 2020), but it would be the devaluation that would break it – and it‘s my view that devaluation would not happen against other fiat currencies, but against gold (and by extension silver). With devaluation (it‘s still far away in the future), a true inflation would arrive and stay, which forms a more drastic scenario to the more orderly one I discussed earlier in today‘s article.Another challenge for the stock market bull comes from taxes, as the current and upcoming infrastructure stimuli (wait, there is the $2T one to move the U.S. to a carbon-neutral future on top) would result in higher tax rates next year, which would further hamper productive capital allocation as people and institutions would seek to negate their effect. Needless to say, gold, miners and real assets would do very well in such an environment.Let‘s move right into the charts (all courtesy of www.stockcharts.com).S&P 500 OutlookStrong S&P 500 upswing on Friday, on a not too shabby volume. The key question is whether the bulls can keep the momentum on Monday, and ideally extend the gains at least a little. Signs are they would be able to achieve that.Credit MarketsHigh yield corporate bonds (HYG ETF) reached the mid-Mar highs, and need to confirm Friday‘s upswing – odds are they would continue higher on Monday as well, because the volume comparison is positive and daily indicators don‘t appear yet ready to turn down.Inflation ExpectationsInflation expectation as measured by Treasury inflation protected securities to long-dated Treasuries (TIP:TLT) ratio, keep making higher highs and higher lows – the market is recalibrating towards a higher inflation environment, but not yet running ahead of the Fed as the 10-year Treasury yield (black line) shows. It‘s so far still orderly.Smallcaps and Emerging MarketsThe Russell 2000 (IWM ETF, upper black line) is underperforming the S&P 500, and so are the emerging markets (EEM ETF) – both signals of the defensive nature of the stock market upswing. The animal spirits aren‘t there to the full extent (don‘t be fooled by the strong VTV showing), but have been making a return since Thursday.Gold, Silver and MinersA new turn is taking shape within the Tuesday-challenged precious metals upswing – the miners appear yet again assuming leadership. The call I made on Thursday, hinting at a change, appears materializing to the bulls‘ benefit.Comparing gold and silver at the moment, results in the conclusion of the yellow metal leading higher after all – and the positive turn in copper (which is also reflected in the copper to 10-year Treasury yield ratio) confirms that.Crude OilBlack gold keeps defending the 50-day moving average, showing the reflation trade in both commodities and stocks isn‘t over yet. The oil index ($XOI) is once again pointing higher, and so is the energy ETF (XLE). While Friday‘s volume was relatively modest, oil has good prospects to keep recovering this week.SummaryThe odds of an S&P 500 upswing were confirmed by the Friday‘s upswing, in line with the put/call ratio indications. Credit markets concur, and while the sectoral constellation isn‘t totally bullish, it can still carry the index to new highs.Miners made an important turn higher relative to gold, and the sector can enter today‘s trading on a stronger footing than was the case on Friday. The green shoots in the precious metals sector appear likely to take a turn for the better this week and next. As always, keeping a close eye on the gold‘s relationship to nominal yields, is essential – be it decoupling from rising ones, or a strong upswing on retreating ones.

S&P 500 is still consolidating Monday‘s sharp gains, showered with liquidity. Yet it seems that eking out further gains is getting harder as the price action took the index quite far from its key moving averages. If I had to pick one sign of stiffer headwinds ahead, it would be the tech sector‘s reaction to another daily retreat in Treasury yields – the sector didn‘t rally, and neither did the Dow Jones Industrial Average. Value stocks saved the day, and it appears we‘re about to see them start doing better again, relatively speaking.Yes, the risk-reward ratio for the bulls is at unsavory levels in the short run. What about being short at this moment then? It all depends upon the trading style, risk tolerance and time horizon. I‘m not looking for stocks making a major top here as the bull run is intact thanks to:(..) Well, liquidity and bets on the stocks benefiting from the coming infrastructure bill. Any way you look at it, the market breadth is positive and ready to support the coming upswing continuation, even though I look for a largely sideways day in stocks on Tuesday given the aptly called fireworks to happen yesterday. Sizable long profits in stock market trades #6 and #7 have been taken off the table – 149 points in my Standard money managements, and 145 points in the Advanced money management that comes on top.My prognosis for yesterday‘s session materialized, and we have seen quite a record number (around 95%) of stocks trading above their 200-day moving averages, which is similar to the setup right after the post-dotcom bubble bear market 2002/3 lows, or 1-2 years after the bull market run off the Mar 2009 lows. Hard to say which one is more hated, but I see the run from Mar 2020 generational low as the gold medal winner, especially given the denial accompanying it since.Gold made a run above $1,740 in line with retreating yields and copper not giving up much gained ground, but the immediate run‘s continuation to the key $1,760s or even better above $1,775 looks set to have to wait for a few sessions. I don‘t expect today‘s FOMC minutes release to change that. While the metals are likely to take their time, the healthy miners‘ outperformance supports its continuation once the soft patch we appear entering, is over.The Thursday called dollar downswing is playing out, putting a floor below the commodities, which are undergoing a much needed correction from their late Feb top. It‘s not over yet, and the shy AUD/USD upswing is but one clue. Given the oil price meandering around $60 (by the way, not even the unlikely decline to $52 would break black gold‘s bull run), the USD/CAD performance as of late is disappointing, as the greenback got mostly stronger since mid Mar. More patience in the commodities arena appears probable as we‘re waiting for both Treasury yields and inflation expectations to start rising again.Let‘s move right into the charts (all courtesy of www.stockcharts.com).S&P 500 OutlookThe SPX headwinds are readily apparent, and a brief pullback would be healthy. Don‘t look though for too much downside.Russell 2000 and Emerging MarketsSmallcaps are still underperforming for now, but emerging markets scored gains thanks to improving yield differentials and another down day in the world reserve currency.Focus on TechnologyTech (XLK ETF) was the key retreating sector yesterday – little wonder the mid Feb resistance it‘s approaching. The big names ($NYFANG, black line) are lagging behind still, showing that the sector got a little ahead of itself on a short-term basis.Gold and SilverGold‘s Force index finally crossed into positive territory, but the yellow metal isn‘t taking yet advantage of retreating yields in a visually outstanding way. Quite some resistance in the $1,740s needs to be cleared first, which would likely take a while, but the rally‘s internals are still on the bulls‘ side.Gold miners keep strongly outperforming the yellow metal, with the seniors (GDX ETF) doing particularly great – better than gold juniors or silver miners. Seeing signs of the silver sector getting too ahead, wouldn‘t likely be bullish at all unless sustained – at the current stage, I can‘t underline these words enough in the ongoing physical silver squeeze.Gold to Silver RatiosSince the gold bottom was hit in early Mar (that‘s still the leading hypothesis), the precious metals‘ leadership has moved to the yellow metal – and it‘s visible in both the gold to silver ratio and gold miners to silver miners one. The time for the white metal to (out)shine would come, but clearly isn‘t and won‘t be here any day now.SummaryS&P 500 is likely to keep consolidating gained ground, and (shallow) bear raids wouldn‘t be unexpected here – in spite of solid corporate credit markets performance. Yet, it‘s the extraordinary nature of VIX trading and put/call ratio moves, that point to the bull market run as intact and merely in need of a breather.Precious metals are likely to run into short-term headwinds before clearing out the next major set of resistances above $1,760s. The upswing though remains healthy and progressing, and will be led by the gold sector.

S&P 500 went nowhere yesterday – just like the prior Monday, heavy buying into Friday‘s close met no follow-up the day after. After almost touching 16 to close the week, VIX peeked higher yesterday only to reverse back down. Nice try but if you look at the put/call ratio turning down simulatenously, the alarm bells are far from ringing.The S&P 500 rise of late isn‘t without its good share of non-confirmations though. The ones seen in Russell 2000 and emerging markets got a fresh company in the corporate credit markets. No denying that the stock market is in a strong uptrend, but it got a bit too stretched vs. its 50-day moving average – a consolidation in short order would be a healthy move, but the CPI readings above expectations don‘t favor one today.If you look at the put/call ratio again, its lows throughout Mar and Apr haven‘t been reaching the really exuberant levels of prior months, hinting at a less steep path of S&P 500 gains. And what about the volume print as stocks went about making new highs? Not encouraging either, and it‘s not that rising yields would be causing trouble:(…) The retreat in rising yields is running into headwinds, much sooner than the 10-year one could reach the low 1.50% figure at least. Value stocks and cyclicals such as financials appear calling it out, and both rose on Friday.And financials had a good day yesterday too. Technology welcomed the reprieve, and the heavyweights joined in increasingly more. Again though, more than a little stretched, these $NYFANG generals are rising while the troops (broader tech) are hesitating, which makes a down day / consolidation quite likely, especially should the TLT retreat again. As I wrote yesterday:(…) The rotation simply isn‘t much there, and the TINA trade isn‘t letting much air to come out of the S&P 500 sectors that would be expected to sell off in a more relaxed monetary policy. And that‘s probably what gold is sensing as it grew weak yesterday. The rising yields aren‘t yet at levels causing issue for the S&P 500, but the commodities‘ consolidation coupled with nominal yields about to rise, has been sending gold down yesterday – and miners confirmed that weakness by leading lower. This would likely be a daily occurence only unless and until copper gives in and slides – that‘s because of the inflation expectations having stabilized for now, but Treasury yields not really retreating. Yes, gold misses inflation uptick that would bring real rates down a little again – and is getting one in today‘s CPI as we speak.Let‘s move right into the charts (all courtesy of www.stockcharts.com).S&P 500 OutlookS&P 500 is no longer trading above the upper border of Bollinger Bands, but volume isn‘t picking yet up either. That makes a largely sideways consolidation the more likely scenario here.Credit MarketsBoth high yield corporate bonds (HYG ETF) and the investment grade ones (LQD ETF) declined yesterday while long-dated Treasuries went nowhere – but the bullish spirits in stocks didn‘t evaporate proportionately. This non-confirmation isn‘t too pressing at the moment.Technology and ValueTech (XLK ETF) stumbled yesterday, and it wasn‘t because of $NYFANG (black line) – yet value stocks didn‘t sell off either during these lately turning vapid rotations.Smallcaps and Emerging MarketsThe long underperformance in both indices vs. the S&P 500 goes on, and is actually a stronger watchout than the corporate credit markets at the moment. Inflation ExpectationsInflation expectations as measured by the TIP:TLT ratio are basing, but bond yields are aiming higher again, making higher inflation on the horizon a virtual certainty.Gold, Silver and MinersThe daily underperformance in miners is worrying – this daily leadership to the downside, where gold and silver declined proportionately to each other. Given that commodities didn‘t point to greater weakness, I consider yesterday‘s precious metals downswing as a bit exaggerated. SummaryS&P 500 still appears as entering a consolidation, but I‘m not looking for way too much downside. The Big Tech names would decide, and if you look at Tesla doing well yesterday, the S&P 500 correction would play out rather in time than in price.Gold depends upon the miners‘ path, and nominal yields trajectory. Once more inflation spills over into CPI readings, that would work to negate temporary weakness caused by real rates pressures, which is what we are getting.

The S&P 500 red candle and then some – erased in a day, that‘s what you get with the Fed always having your back. The staircase climb certainly looks like continuing without any real breather. Whatever steep ascent you compare it to (Jun or early Sep 2020), this one is different in that it doesn‘t offer but token corrections. Not that it would be reasonable to expect a steep downswing given the tide of liquidity, but even sideways trading has become rarer than it used to be.With the VIX still below 17 and the put/call ratio in the middle of its slowly but surely less complacent range, the path of least resistance is higher – the signs are still aligned behind the upswing to go on: (…) Don‘t pin your hopes too high for a (sharp) correction though. Yes, [on Wednesday] stocks listened to the weakening corporate credit markets, and the daily retreat in long-dated Treasuries inspired some profit taking in tech. Quite some run there as yields stabilized, which has turned XLK from very stretched to the downside of its 50-day moving average, to the upside extreme. Tesla also followed suit but I doubt this is a true reversal of tech fortunes.Just at yesterday‘s moves – technology surged higher without too much help from the behemoths, and value stocks surged. Even financials ignored the sharp retreat in yields. Yes, that‘s the result of retails sales outdoing expectations and unemployment claims dropping sharply – the economic recovery is doing fine, manufacturing expands, and inflation doesn‘t yet bite. We‘re still in the reflationary stage where economic growth is higher than the rate of inflation or its expectations.Gold loved the TLT upswing and Powell‘s assurances about not selling bonds back into the market in rememberance of eating a humble pie after the Dec 2018 hissy fit in the stock market (isn‘t this the third mandate actually, the cynics might ask). I called for the sharp gains across the precious metals board sending my open position(s) even more into the black – both on Wednesday:(…) CPI inflation is hitting in the moment, and its pressure would get worse in the coming readings. Yet the market isn‘t alarmed now as evidenced by the inflation expectations not running hot – the Fed quite successfully sold the transitory story, it seems. Unless you look at lumber, steel or similar, of course. None of the commodities have really corrected, and the copper performance bodes well for the precious metals too.and Thursday:(…) Precious metals didn‘t swing higher immediately, but I expect them to take the commodities‘ cue next. When Powell says the Fed isn‘t thinking about selling bonds back into the market, and that he learned a lesson (hello, late 2018), real rates aren‘t probably rising much any time soon. It appears to me a question of time before inflation expectations squeeze the nominal yields some more, which is what gold would love.The stalwart performance in the miners goes on after a daily pause as gold gathers strength and silver outperformed yesterday. Silver miners and gold juniors are pulling ahead reliably as well, not just gold seniors.The run on $1,760 awaits.This is just the beginning, and as I had been repeatedly stating on Twitter:(…) The GDX closing convincingly above $35 would usher in great gold and silver moves.Let‘s move right into the charts (all courtesy of www.stockcharts.com).S&P 500 OutlookNew ATHs, again and this time on rising volume – the momentum still remains with the bulls even though the daily indicators are waning in strength, and as said earlier, $NYFANG causes a few short-term wrinkles.Credit MarketsThe high yield corporate bonds to short-dated Treasuries (HYG:SHY) ratio performance got better aligned with the S&P 500 one, now that nominal yields have retreated.Smallcaps and Emerging MarketsReflecting the turn in the Treasury markets, both the Russell 2000 (IWM ETF) and emerging markets (EEM ETF) clearly turned higher, confirming the direction the S&P 500 has been on practically non-stop since late Mar.Inflation ExpectationsInflation expectations are going down, that‘s the conventional wisdom – and nominal yields duly follow. But the RINF ETF isn‘t buying the TIPS message all that much, proving my yesterday‘s point:(...) Have the rising inflation expectations been banished? I‘m not convinced even though they aren‘t running hotter in the wake of PPI and CPI figures, which are bound to get worse next – if copper and oil are to be trusted (they are). Remember that this is the Fed‘s stated mission for now – to let inflation run to make up for prior periods of its lesser prominence. Gold in the LimelightGold is surging higher ahead of the nominal yields retreat, as the bond vigilantes failed yet again to show up. In the meantime, the inflationary pressures keep building up...Gold, Silver and MinersAs stated the day before, seniors (GDX ETF) would lead gold by breaking above their recent highs convincingly (solidly above $35 on rising volume and bullish candle shape), as the tide in the metals has turned. The unavoidable inflation data bringing down real rates would do the trick, which is exactly what happened. Silver scored strong gains as well, yet didn‘t visibly outperform the rest of the crowd. I look for the much awaited precious metals upleg to go on, and considerably increase open profits.SummaryThe daily S&P 500 downswing is history, and the relentless push higher (best to be compared with a rising tide), goes on.Gold and miners took a cue from the surging commodities, and nominal yields retreat. Patience has been rewarded, and a close above $1,775, is what I am looking for next as the gold bottom is in.

S&P 500 closed in the the red, vindicating my bearish sentiment going into Monday‘s session. And as I have tweeted during the day, the sellling doesn‘t appear to be over. Friday‘s:(…) selling wave before the close looks to indicate hesitation ahead. Even though VIX is attacking the 16 level, and the put/call ratio ticked higher, the bulls are little disturbed thus far.While VIX rose yesterday, it finished only a little above 17 – the tide in stocks hasn‘t turned to fear even temporarily in the least, and the current consolidation would still be one to be bought.That‘s the result of ample liquidity in the system, which is denting the rotations. Yields moved higher yesterday, and defensives including tech or Down Jones Industrial Average rightly felt the pressure more than value stocks.Gold got caught in the daily selling, but again the miners and commodities reveal how little has changed. Oil and copper keep doing very fine, and the precious metals upleg appears undergoing a daily correction only – one that doesn‘t change the larger trend, which is higher (and for the dollar by the way, it‘s pointing down – I‘m not placing much weight upon the USD link arguing that gold is acting weak to the weakening dollar, and thus has to fall). I look at the ratios, yields and other commodities for stronger clues.And the matter of fact is that inflation expectations have yet again turned higher, confirming my earlier calls about transitioning to a higher inflation environment made either recently or more than a month ago. Remember that the Fed wants inflation above all, and made so amply clear:(…) Now, it‘s up to gold and silver to catch up on what they missed since the early Aug 2020. Inflation is running hotter, and the Fed is tolerant of it, amply supplying liquidity. The gold bottom is in, and much brighter days ahead.Let‘s move right into the charts (all courtesy of www.stockcharts.com).S&P 500 OutlookStocks are visibly in a vulnerable position as not enough new buyers have stepped in. The volume print attests to having to go some more on the downside before a local bottom emerges.Credit MarketsBoth high yield corporate bonds (HYG ETF) and investment grade ones (LQD ETF) weakened, and more so than the TLT did – that‘s what a risk-off environment looks like. Thus far, no change on the horizon – this overdue, little correction can keep going on.Smallcaps and Emerging MarketsBoth smallcaps and emerging markets are revealing the concerted selling yesterday – unless these turn higher next, the S&P 500 has further to go to the downside still.Gold in the LimelightGold‘s daily reversal may look ominous, but really isn‘t – it‘s merely a temporary setback. The miners have held up relatively well, and I consider the yellow metal‘s selloff as a reaction to the retreat in nominal yields and first red day in the S&P 500 in quite a while. I‘m standing by the call of decoupling from nominal yields getting more pronounced, and by increasingly lower dollar values powering precious metals higher, especially in the second half of this year – the USD/JPY pair offers clearly clues for the king of metals even now.Look how stubborn the miners to gold ratio is – no, this precious metals upleg isn‘t ending here, no way, it‘s merely getting started, and the panicked bears doubling down this early from the imperfect second bottom, is telling you as much about the state of the market as the ongoing silver squeeze driving relentlessly PSLV stockpile higher, bypassing the SLV.Silver and CopperSilver retreated in tandem with gold but again the fierce copper (copper to 10-year Treasury yields ratio) reveals that this isn‘t a move to be trusted. The trend in precious metals remains higher.SummaryThe S&P 500 consolidation is here, and is a shallow one just as anticipated. The risk-off moves were evident across the board yesterday, and might very well not be over just yet (when looked at from a larger than daily perspective).Gold and miners are undergoing a shallow correction as well, but nothing more than that. Before too long, precious metals will shake off the setback, and revert to breaking above another resistance, the $1,800s. Since we broke above the two levels I discussed recently (the $1,760s and closing above $1,775 on solid internals), the lows can be comfortably declared as in across the precious metals board, and I look for miners to keep leading the upleg.

One more day of upside rejection in S&P 500, in what is now quite a long stretch of prices going mostly sideways. As unsteady as VIX seems at the moment, it doesn‘t flash danger of spiking in this data-light week, and neither does the put/call ratio. As I wrote yesterday about the selling pressure, these tight range days accompanied by 30-ish point corrections is as good as it gets when the Fed still has its foot on the accelerate pedal. Yes, you can ignore the Kaplan trial baloon (have you checked when he gets to vote on the FOMC?) that spiked the dollar on Friday but didn‘t put all that a solid floor before long-dated Treasuries as seen in their intraday reversal. Highlighting the key Treasury, inflation and reflation thoughts of yesterday, as these are still here to power stocks higher:(…) the 10-year yield has been quite well behaved lately, closing at 1.65% only on Friday. The April calm seems to be over, and I‘m looking for the instrument to trade at 1.80% at least at the onset of summer. Then, let‘s see how the September price increases telegraphed by Procter & Gamble influence the offtake – will the price leader be followed by its competitors? That‘s one of the key pieces of the inflation stickiness puzzle – and I think others will follow, and P&G sales and profitability won‘t suffer. The company is on par with Coca Cola when it comes to dividends really.Once there, we would progress further in the reflation cycle when inflation is no longer benign and anchored. We‘re though still quite a way from when the Fed tries to sell rising rates as proof of strengthening economic recovery – once the bond market would get to doubt this story though, it would be game over for its recent tame behavior.Gold market enjoyed its fireworks, aided mightily by the silver squeeze run. The inflation theme is getting rightfully increasing attention, and commodities are on the run across the board. Just check yesterday‘s oil analysis or the bullish copper calls of mine. I could just as easily say that copper is the new gold – it has been certainly acting as one over the past many months, yet the yellow metal‘s time in the limelight is about here now. And don‘t forget about silver bring you the best of two worlds – the monetary and industrial applications ones.When it comes to USD/JPY support for the unfolding precious metals upswing, we indeed got the reversal of Friday‘s USD upside:(…) The taper story being revealed for a trial baloon that it is, would quickly reverse Friday‘s sharp USDX gains, where particularly the USDJPY segment is worth watching. Let‘s move right into the charts (all courtesy of www.stockcharts.com).S&P 500 OutlookThe declining volume tells a story of not enough conviction to go higher or lower – the market remains vulnerable to brief spikes either way such as those seen and covered in both today‘s intraday Stock Trading Signals.Credit MarketsAs inconclusive intraday the corporate credit markets may seem, the pressure to go up is there, regardless of the high yield corporate bonds reversal. Long-dated Treasuries aren‘t standing in the way but it must be noted that these have given up their intraday upswing completely, and opened with no bullish gap.Technology and FinancialsTechnology lost the advantage of higher open, and wasn‘t helped by the poor daily $NYFANG performance. At the same time, value stocks continued higher but gave away a portion of intraday gains. The markets are on edge, and a bigger move this or more likely next week, shouldn‘t come as a surprise.Smallcaps and Emerging MarketsThe Russell 2000 turned higher on Monday, and emerging markets seem waiting for more signs of dollar weakness. Overall, the U.S. indices still continue outperforming the international markets.Gold and Miners Short-TermVolume returned into the gold market, and so did miners‘ outperformance. While these didn‘t close anywhere near their mid-Apr highs unlike gold, they had extremely undeperformed on Friday – what happens over the next few sessions would provide clue as to whether strength genuinely returned yesterday.Gold and Miners Long-TermThe copper to 10-year Treasury yield is edging higher again, and the miners to gold ratio strongly rebounded, proving my yesterday‘s point that the real parallels are the 2018 and 2019 gyrations, not the uniquely deflationary corona crash.SummaryThe S&P 500 remains vulnerable to short-term spikes in both directions, but the medium-term picture remains positive – the strong gains since late Mar are being worked off here before another upswingGold and miners proved themselves yesterday, and scored strong gains in a universally supportive array of signals across commodities, Treasuries, and also the USD/JPY daily move. Well worth not retiring the benefit of the doubt given to the precious metals bulls – more gains are in sight.

Wednesday brought us daily consolidation of prior S&P 500 gains, and that‘s a positive outcome for the bulls. Base building at a higher level, if you will, is looking set to continue also today. The credit market performance reveals that it‘s a reasonable expectation, and the internals examination would reveal the details of a coming run higher. Gold paused yesterday, and of course still doesn‘t look ready to rebound. But does it mean it‘s acting consistently weak? No, and today‘s analysis will show that its better days will come – and we won‘t have to wait for all that long. Let‘s dive into the charts (all courtesy of www.stockcharts.com). S&P 500 Outlook Yesterday‘s daily candle was one of hesitation, not marked by any kind of volatile move. The volume also shows that the price moves didn‘t invite much interest to jump in or out. The Force index nicely illustrates the directionless nature of very short-term trading. After the steep correction, it‘s back to neutral, and the muddle through February ahead can really start. Credit Markets and Smallcaps High yield corporate bonds (HYG ETF) continue trading with an upward bias, and the upper knots don‘t frighten me as the swing structure is positive, and there is no retreat to speak of. I see the credit market strength as conducive to further stock gains. The Russell 2000 (IWM ETF) is doing better than the S&P 500, and this is to be expected in a maturing bull market run. I certainly look for smallcaps to outperform the 500-strong index in the first half of 2021. S&P 500 Sectoral Peek Similarly to the S&P 500, technology has been consolidating its gains, yet with a bit more of a bearish flavor. Also the volume overcame Tuesday‘s levels, unlike the declining S&P 500 one. Technology being among the stronger sectors, that‘s what the above chart shows. The rotation into value stocks (as the tech took it on the chin) has failed, and this heavyweight sector (led by $NYFANG) is again leading stocks higher. As we‘re seeing absolutely no signs of broad based sectoral outperformance (which would be followed by less and less advancing issues), the stock bull market is far from making a top. The copper to gold ratio is repeating its December consolidation pattern before launching higher yet again. That‘s a testament to the strength of the economic recovery, which will keep lifting commodities including oil, and also ignite the love trade in precious metals discussed on Tuesday. Gold in the Spotlight Today‘s premarket price action isn‘t a nice sight to the precious metals bulls, as gold is largely mirroring silver‘s losses. But how far can this short squeeze reversal trade run? Can it usher a new downtrend? I don‘t think so. The protracted gold basing pattern I described last Monday, is holding up. What we‘re seeing, is a kneejerk reaction to a 33K drop in new unemployment claims (supportive for risk on assets). Does it mean that we‘re on the doorstep of a strong job market recovery? Given last 6 month payroll developments, it would take us … 5 years to get back to pre-corona levels. This gold chart will get a fresh facelift and a new red candle today. I look for the volume at the close, and the size of the lower knot first before drawing conclusions. Now that prices sunk below $1800, the lower Bollinger Band is getting pushed. Is a new trend starting here? That‘s the key question and I still say no as this (isolated) kind of a strong move meets corrective forces next. The dollar and gold chart shows that the strongly negative correlation is slowly giving way to more indepedent trading between the two assets. Now that the dollar is in a short-term run higher, it‘ll exert less pressure upon the precious metals. Is gold‘s slide today announcing much higher dollar values ahead? The dollar is less than half a percent higher while gold plunged by over two and half percent, which doesn‘t look like a move that can last, based on the fiat currency vs the metal of kings intermediate-term dynamic. Rising yields accelerating their decline in 2021, are another factor of gold‘s short-term headwinds. While I don‘t see yields as falling from a medium- or long-term perspective any time soon, they are set to stop dragging gold to the downside – and the Dec 2020 and also 2021 performance shows that gold buyers are happy to step in and buy the plunge. Gold to corporate bonds ($GOLD:$DJCB) ratio reveals the yellow metal as keeping gained ground. The rising Treasury yields are a manifestation of a large spending bill coming, and deteriorating public finances, which will catch up with the greenback. Summary The stock market recovery got an unemployment claims catalyst, and powers higher instead of more short-term digestion of recent gains. With a few points away from the highs, the talk about a correction will die down now hopefully as the value stocks have quite some catching up to do still. Gold is under short-term pressure, and the comming sessions would show just how much the market thinks the current fall has been overdone. The basing pattern remains unbroken, with technicals and fundamentals in place for the upcoming bull run. Patience is still the name of the game in precious metals currently still. Thank you for having read today‘s free analysis, which is available in full at my homesite. There, you can subscribe to the free Monica‘s Insider Club, which features real-time trade calls and intraday updates for both Stock Trading Signals and Gold Trading Signals.