The Wild Card Is Back
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S&P 500 rose, once again driven by tech and not value. That‘s still defensive, mirroring the weak credit markets posture. While waiting for bonds to turn – not that there wouldn‘t be an optimistic HYG open yesterday – the Austria lockdown news sent markets into a tailspin, the fear being good part of Europe would follow suit rather sooner than later. Oil has taken the crown of panicked selling, stocks held up better, and precious metals weren‘t changed much.
Sure, any crippling of European economic activity would take a toll at the most sensitive commodities, but in light of energy policies across much of the Western world, it‘s my view that oil prices would be affected only in the short-term. This isn‘t a repeat of the Apr 2020 liquidation sending black gold negative. Rest of the world would be happy to step in, U.S. included, as we‘re entering winter with comparatively very low stockpiles from oil to copper – and don‘t get me started on silver. If you want green economy, these metals are essential, and oil is still in huge demand in the interim.
Fed money printing hasn‘t vanished, debt ceiling awaits, and dollar is so far still solidly underpinned. Banking sector and emerging markets performance isn‘t panicky, but some time for stocks to come back at ATHs, is needed. Precious metals resilience is encouraging for commodities, which need the most time to recover (eyes on energy).
Let‘s move right into the charts (all courtesy of www.stockcharts.com).
S&P 500 and Nasdaq Outlook
S&P 500 bulls have the upper hand, but short-term volatility and uncertainty is creeping in. Still, there is no sinking the bull right here, right now.
Credit Markets
Tentative signs of credit markets stabilization are here, and HYG turnaround to last, is the missing sign. I‘m though not looking for risk-off slant to disappear, which would slow down the coming rise in yields.
Gold, Silver and Miners
Gold and silver are still consolidating, and the more time passes at current levels, the less opportunity the bears have. The chart remains very bullish as precious metals are anticipating inflation to come.
Crude Oil
Crude oil bulls are facing spanner in the works today, and it‘s my view the sellers wouldn‘t get too far. I‘m looking at oil sector to presage that.
Copper
The copper setback was soundly bought, and commodities hardly sold off, the same for other base metals. I still like the chart posture – favors the bulls.
Bitcoin and Ethereum
Bitcoin and Ethereum bears took the gauntlet, and another opportunity to pause might be here. I‘m not yet optimistic prices would hold out before the upleg resumes.
Summary
- S&P 500 bulls keep hanging in there, as if waiting for bonds to come to their senses. The credit markets non-confirmation being probably in its latter stages, was my yesterday‘s point – but with corona panic returning, all short-term bets are off. Looking at the big picture, energy hasn‘t been fixed, precious metals are set to rise sharply, and inflation hasn‘t yet knocked off stocks or the real economy. Look for VIX to keep rising from the current 17.50 level.
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