SPY Breakout

S&P 500 overcame Thursday‘s Treasury auction setback, breaking above 4,415 with ease – and tech led in spite of yields not really retreating. This is bullish, and Moody‘s outlook downgrade would be shaken off similarly fast. Just review yesterday‘s video where I talked what that means for the dollar and risk assets within the current macro landscape, covering the below areas:

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For all the macro noises such as slow deterioration in the job market (continuing claims), openings are still high, wage pressures there, and inflation expectations at consumer level rising. These are all characteristic of latter innings goldilocks as much (mistakenly complacent) mainstream doubts about sticky inflation, persist. This – and supercore CPI developments – lend more sense to Powell‘s uncertainty as to whether the Fed is done raising rate (less pronounced bearish factor Tuesday), especially considering that financial conditions have stopped being restrictive.

Yes, advance-decline line is less positive, and percentage of stocks trading below their 50-day moving average together with credit markets could have offered a more bullish picture, but this is what we have – and I dive into the implications in the individual chart sections.

The key data ahead are CPI (Tuesday) and retail sales (Wednesday) – headline would probably keep down to 3.4% YoY, but core is to remain above 4%. PPI would be more to Fed‘s liking, and retail sales are to go slightly negative. All in all, CPI could turn out as bearish stocks (the way I discussed in last week‘s video), and help the dollar above 106 with yields rising too.

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Let‘s move right into the charts (all courtesy of www.stockcharts.com) – today‘s full scale article contains 6 of them, featuring S&P 500, yields, credit markets, precious metals, oil and copper.

S&P 500 and Nasdaq Outlook

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The sellers reached only into high 4,350s during the European session, and tech followed by communications and discretionaries led S&P 500 higher, with industrials (my key non-tech pick to do well) in close tow.

Credit Markets

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Powell‘s hawkish message Thursday wasn‘t really dialed back Friday – long end of the curve keeps retreating, and also short end of the curve is about as high as could be. Of course, that‘s a function of inflation data progression (sticky theme).

Gold, Silver and Miners

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Precious metals are very close to the local bottom – and fresh retreat in yields would (now that the dollar is again resting in what could turn out as USD bullish flag) confirm that as much as any flare up in the Middle East (markets are too complacent – with reason). Still, the main driver would be upcoming realization of slowing down growth while inflation accelerates, in other words stagflationary episode.

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