Inflation Ambush
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Today‘s core PCE is likely to dial back the unjustified easing Fed expectations, bringing 10y yield back to 4.25% roughly. Even though yields are to rise next year, first they would retreat in a path as described here, and that would exert pressure on real assets and help the dollar. Yesterday‘s stock market upswing was driven by tech, with the communications and discretionaries duo not exactly following through. Even though the defensives were down, market breadth moves remained unsatisfactory on a daily basis, so it would really take a nonchalant market reaction to core inflation data remaining stubborn regardless of job market starting to show cracks.
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Let‘s move right into the charts (all courtesy of www.stockcharts.com) – today‘s full scale article contains 3 of them.
Gold, Silver and Miners
Precious metals remain in the upswing mode, but won‘t have smooth sailing day ahead – stopping a few bucks from my target of $1,980, gold is likely in need of cooling off before taking on this key resistance again. Would it succeed? Given what I see ahead in yields, I‘m afraid not immediately, and pullback even to mid $1950s can occur after failed $1,980 breakout attempt. For those patient, this is mere noise as $2,050 - $2,100 would be approached later this year.
Crude oil is likely to consolidate in the low $80s, and even if black gold is up today, the corrective move looks undone and at least $81 can get easily tested again.
Copper
Copper isn‘t out of the woods, and as per the caption I‘m looking for consolidation (slight correction) first. With the return of inflation, commodities would do well – longer term view, but now yields are to bite first.
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