Totally not transitory inflation readings didn‘t sink S&P 500 – stocks recovered, and are likely to spend trading today near 4,400. Credit markets didn‘t disappoint after all, but the sectoral composition isn‘t a picture of screaming strength. Value erased steep intraday losses, so did the Russell 2000, but tech visibly lagged instead of being prodded by retreating yields. VIX also is approaching the more complacent end of its spectrum.

So, how far could the bulls make it? 4,420 is one resistance level, and then prior local highs at 4,470 await. The fate of this correction is being decided right there, and it‘s my view we have lower than 4,260 to go still. Therefore, I‘m taking a big picture view, and that is one of continuous inflation surprises to the upside forcing the Fed to taper, which it may or may not do. The policy risks of letting inflation run wild are increasing, so the central bank would find it hard not to deliver fast – the market would consider that a policy mistake.

The tone of yesterday‘s FOMC minutes has calmed the Treasury market jitters, and the dollar succumbed. So did inflation expectations, but the shape of the TIP:TLT candle suggests that inflation isn‘t done and out. The Fed is in no position to break it, supply chain pressures, energy crunch and heating job market guarantee that it will be stubbornly with us for longer than the steadily increasing number of quarters Fed officials are admitting to.

That‘s what precious metals and commodities are sensing, by the way. Cryptos aren‘t having second thoughts either. Copper caught spectacular fire, and its sudden outperformance is very conducive to real assets appreciation. But where does that leave stocks?

Counting on the Fed being behind the curve, inflation has the power to derail the S&P 500 bull run – the more so it runs unchecked. The 1970s stagflation brought several wild swings, cutting the index in half as it spent the decade in a trading range. And given the breadth characteristics of the 500-strong index these days, the risks to the downside can‘t be underestimated. What‘s my target of 4,260 in this light?

Let‘s consider that from the portfolio point of view – purely stock market traders might prefer to short exhaustion at 4,420 or the approach to 4,470, or balance the short position‘s risk in the stock market with precious metals, cryptos and commodity bets they way I do it – and it‘s working just fine as the precious metals and crypto positions do great while I‘m waiting for retracement in oil and copper (in price or in time).

Let‘s move right into the charts.

S&P 500 and Nasdaq outlook

SPX

S&P 500 is in the early phase of its bullish upswing, which can fizzle out easily unless the 50-day moving average is conquered again. The bulls have benefit of the (short-term) doubt.

Credit markets

HYG

Quality debt instruments and HYG turned around, lending credibility to yesterday‘s stock rebound.

Gold, silver and miners

Gold

Precious metals are finally on a tear, and the exhaustive move in the miners being reversed this fast, has legs. Get ready for a challenge to $1,840 next as the fireworks I was looking for, arrived.

Crude oil

WTIC

Crude oil consolidates in a very narrow range, and the low volume hints at better not expecting too much downside.

Copper

Copper

Last three days, copper didn‘t really look back, and clearly wants to outperform the CRB Index, which has very positive implications for precious metals in the very least. The predictive effect upon the real economy needs to be viewed in light of monetary and fiscal policies getting potentially less supportive, though.

Bitcoin and Ethereum

BTCUSD

The expected crypto pause came, and is gone, how did you like it? The crypto bull run is on!

Summary

Stock market rebound has to deal with 4,420 now, and in today‘s extensive analysis, I talked how to approach the current macroeconomic setup (inflation, taper reflected in Treasuries and the dollar) accounting for real assets too. S&P 500 isn‘t likely out of the woods yet, and the next few days will be a crucial in showing whether we‘re past this correction, or not. Or, if more than a few percent dip awaits. The places to enjoy strong gains, are precious metals, cryptos and commodities.

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.

Feed news

Latest Forex Analysis


Latest Forex Analysis

Editors’ Picks

EUR/USD remains vulnerable near 1.1600 amid firmer dollar

EUR/USD is hovering around 1.1600, on the defensive amid a broadly stronger US dollar. Markets cheer US-Sino talks and stimulus progress despite looming inflation fears. The Fed-ECB monetary policy divergence weighs down on the euro. US Consumer Confidence data awaited.

EUR/USD News

GBP/USD hovers around 1.3750, Brexit talks in London eyed

GBP/USD is trading above 1.3750, struggling for a clear direction after Monday’s rebound. Market sentiment improves on stimulus hopes, US-Sino talks but the dollar remains firmer. UK’s Frost offers EU Dec deadline to solve the row over the NI proposal. All eyes on the Brexit talks.

GBP/USD News

XAU/USD flirts with $1,800 amid stronger USD, risk-on mood

Gold snaps a five-day uptrend, refreshes intraday low of late. Market sentiment dwindles amid pre-GDP caution, light calendar. US Treasury yields rebound, add strength to the greenback.

Gold News

Traders book profits from Shiba Inu to push Dogecoin to $0.34

Dogecoin price could see some incoming speculative money from profit-taking in Shiba Inu A bullish close above the Cloud on the daily chart indicates future upswing likely. The outperformance of Shiba Inu is likely as Dogecoin lags the majority of the market.

Read more

Conference Board Consumer Confidence October Preview: Watch what we do... Premium

Confidence expected to slip to 108.3 from 109.3 in September. Michigan Consumer Sentiment eroded slightly in October. Sentiment seems divorced from labor market and Retail Sales. Federal Reserve taper will not hinge on a happy US consumer.

Read more

Majors

Cryptocurrencies

Signatures