Market overview: Decision Time
S&P 500 declined, within the existing narrow range, but more downside is likely to come. Bonds continue pointing lower, commodities are squeezing, yields aren‘t meaningfully retreating, and inflation keeps biting.
As stated yesterday:
(…) So, stocks are still facing the tightening Fed phase, not yet smelling the Fed pivot – the downside can reach further still, and the new battle for 4,080 is approaching. Odds are we would head that way before mid-session tomorrow – today, I‘m looking for a lackluster, paring the gains, session in stocks. And that holds true for precious metals as well – Monday‘s decline was duly reversed, and copper is carving out a local bottom as we speak. Crude oil is of course offering only shallow corrections and didn‘t make it much below $117.50. Energy keeps running, and it ain‘t over by a long shot – when it comes to time, though, I‘m looking for the rally to last a few short months more before taking an even greater toll toll on the real economy and starting to decline somewhat.
Cryptos are refusing to decline much, and that illustrates the current balance of power nicely – larger moves are unlikely. Friday‘s CPI awaits, and it would likely show limited Fed room to back off tightening – Treasuries aren‘t waiting and keep requesting more rate hikes. The daily price action between different maturities illustrates the building strains. In this environment, sticking with real assets while favoring the short side in stock indices is the reasonable positioning.
The point of today‘s analysis is to assess the shape markets are in right at the ECB forestaste of dealing with inflation – distinguishing the verbal and real moves and market sensitivities. Plainly stated, how much these doubt the newfound inflation fighting spirit in the face of deteriorating economic data…
Let‘s move right into the charts (all courtesy of www.stockcharts.com).
S&P 500 and Nasdaq Outlook
S&P 500 bears won the day and are readying another charge – odds are the current price congestion would resolve to the downside. Too much underperformance in the high beta plays.
This isn‘t a risk-on turn, there is still some bottom searching to be done. Tightening, that‘s still the name of the game – not enough worries about growth prospects yet.
Gold, Silver and Miners
Precious metals are still sideways, waiting for a catalyst to start looming. Countdown is on, and the risks of being out of the market outweigh those of being in.
Crude oil keeps moving higher, and it‘s little surprising. Still no peak – I‘m looking for the climb to continue in a relatively narrow range where dips are to be bought.
Copper is also lagging, but at least the panic selling is over – with more focus on the monetary turn ahead and stockpile dynamics, the red metal would start recovering, gradually first. Lean times ahead for now.
Bitcoin and Ethereum
Cryptos aren‘t convincing in the least – that‘s another market in trouble. Biting global liquidity – the bottom isn‘t yet in.
S&P 500 is likely to get weaker as increasingly dull economic and monetary data keep arriving. The coming 4,080 break to the downside would be just the start – the path of getting there remains slow, but the direction is clear, bonds say. Semiconductors, smallcaps, financials, you name it – these shouldn‘t underperform in a bull upleg. And that means we aren‘t in one (my words continuously) – the bottom hasn‘t yet been reached, and the relative lull (bear market rally) is in its latter innings. As commodities continue surging, crude oil is leading – stocks can‘t meaningfully bottom without oil rolling over first. Not happening now or in the weeks ahead – precious metals and copper are waiting patiently for their turn to shine.
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All essays, research and information represent analyses and opinions of Monica Kingsley that are based on available 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. Please be advised that you invest at your own risk. Monica Kingsley is not a Registered Securities Advisor. By reading her writings, you agree that she will not be held responsible or liable for any decisions you make. Investing, trading and speculating in financial markets may involve high risk of loss. Monica Kingsley may have a short or long position in any securities, including those mentioned in her writings, and may make additional purchases and/or sales of those securities without notice.