Correction Time Indeed
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S&P 500 didn‘t look back after Friday‘s opening bell - poor AAPL, AMZN guidance stemming from the cloud business chiefly (AMD, INTC, MSFT noting cooling in personal computing) was ignored, and the bull flag that I told you about in the premium section, was duly resolved to the upside.
Bonds confirmed as far as their risk-on posture goes, but HYG looks in need of a little daily consolidation while long-term yields need more time basing as the Fed and foreigners have largely vacated the market – that goes chiefly for Japan, Europe, and also China in need of supporting their own currencies or making energy purchases, which is meaningfully impacting respective trade balances. The dollar though looks medium-term vulnerable here – the upswing of last two days leaves something to be desired, the greenback has potentially topped, or at least (this one is sure) has entered a corrective mode.
The current era of tight money is best illustrated by the degree of yield curve inversion, and how the short end of the curve is still pushing the Fed to tighten not only by 75bp in Nov, but by the same amount in Dec too. Having looked at recent central bank moves (Australia and Canada lowering the pace of rate increases while only ECB tightened in line with expectations), the Fed would probably though relent after Nov as well (the cracks overseas are growing, debt servicing costs in the States inexorably rising, and currency crises abroad looming), which has implications for all asset classes discussed below.
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Let‘s move right into the charts (all courtesy of www.stockcharts.com) – today‘s full scale article features good 4 ones.
Gold, Silver and Miners
Precious metals would rejoice over the dollar consolidation, and the only question is whether USD needs to pause in its upswing, or has to really correct lower – the odds are we would get a greenback downswing before midterms. Add some focus on waning growth, and not on inflation fighting, and the bullish bias manifests.
Copper
Copper will join precious metals, and its chart posture is looking fine. The only watchout is should USD swing to new highs, which isn‘t though immediately (this year) likely.
