Inflation Trades – Rebounding or Sinking

Again, today’s report will be shorter than usual and focus on select charts to drive position details of all five publications.

Let‘s move right into the charts (all courtesy of www.stockcharts.com).

S&P 500 and Nasdaq Outlook

Yesterday‘s S&P 500 downswing was driven by tech, and it wasn‘t the heavyweights that pulled it down. Yes, Nasdaq is in a precarious short-term position as the 500-strong index – about to fall steeply just as gold did? Probably not, but vulnerable to a corrective move that could easily reach a few percent. The infrastructure bill is rather factored into the expectations, and similarly to the Fed taper looming, any surprise could serve as a selling catalyst. The drying up volume may not be a sign of no more sellers here, but rather of a combination of timid sellers and a drying up pool of buyers. With the strong CPI data likely to be announced tomorrow, the bears would likely try their luck.

Credit Markets

• High yield corporate bonds are only relatively resilient – they are under the same kind of pressure as quality debt instruments. Credit spreads are likely to start widening again in confirmation of the continued albeit doubted economic expansion – as yields start their (slow) march higher again, look for the ride in equities to get rockier and for tech to start diverging. Last but not least, the market breadth indicators aren‘t exactly at their strongest – signs of weakening (warranting caution in stocks) are impossible to miss.

Gold, Silver and Miners

The weekly gold chart shows just how overdone the plunge has been – and that it went at odds with both TIPS and (understandably once again) rising inflation expectations. The chart also reveals the success of the Fed‘s June actions in i.a. driving gold down. Does the market seriously believe that the Fed would turn into an inflation fighter? That they wouldn‘t lag behind both the incoming forward-looking and lagging inflation metrics? Make no mistake, the June ISM services PMIs were the highest ever – there is plenty of inflation in the pipeline, and you‘re, in essence, making a bet whether the central bank will duly mop up the excesses or not. I‘m in the latter camp, and that means the current gold and silver values are highly interesting to the medium-term investor and trader.

Crude Oil

Oil has rebounded off the premarket lows and is likely to turn higher from here. Note the oil sector resilience vs what would likely turn out as overdone selling before yesterday‘s regular session kicked in.

Copper

Copper has likewise stabilized in the PMs induced selloff, hitting commodities as well. On the one hand, the volume doesn‘t indicate local low being reached already. On the other, the 4.20s zone is likely to hold unless a game-changer strikes. That‘s unlikely at the moment – the inflation data this week are more than likely to support real assets, even if they give the Fed an excuse to indicate improving economic conditions in Jackson Hole and announce a taper in September. Look for commodities to recover then fast, faster than precious metals.

Bitcoin and Ethereum

The crypto upswing goes on, without respite, with every dip promptly bought. As the $48-50K resistance in Bitcoin approaches, look for air to become a little thinner – it would take time to overcome it, and Ethereum can be relied upon in showing the direction. It‘s also positive to see both leading cryptos rebound almost as strongly off the capitulation July lows.

Summary

In place of summary today, please see the above chart descriptions for my take.

Thank you for reading today‘s free analysis, which is available in full at my home site. There, you can subscribe to the free Monica‘s Insider Club, which features real-time trade calls and intraday updates for all the five publications: Stock Trading Signals, Gold Trading Signals, Oil Trading Signals, Copper Trading Signals and Bitcoin Trading Signals.

Thank you,

Monica Kingsley
Stock Trading Signals
Gold Trading Signals
Oil Trading Signals
Copper Trading Signals
Bitcoin Trading Signals
www. monicakingsley.co
[email protected]

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All essays, research and information, represent analyses and opinions of Monica Kingsley that are based on availability 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.

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