PPI preview for stocks

S&P 500 bears couldn‘t maintain the momentum, and the buyers pulled off a fake breakout. As much as it was supported by bonds, these gave up both their intraday gains and risk-on posture in what bears hallmarks of a first refusal to go up. Not that I would be expecting any sizable upswing today, the 3,620s would provide first (easy to overcome) level of resistance. This would be tested on the initial PPI reaction – it‘s likely that stocks would try to interpret it in a bullish way before realizing that tomorrow‘s CPI is what matters more to the Fed really.

Given though the 0.4% m/m PPI and the core and y/y PPI figures balancing themselves out, stocks are obliging to the downside, which makes a fake breakout later today an increasingly moot proposition.

Therefore, today is likely to bring only modest initial appreciation struggle at best –one that would be countered during the regular session. Choppy day where any upswing would be of fleeting nature as long-dated Treasuries haven‘t kept promising intraday gains, making their stabilization still suspect. The short end of the curve still reflects hawkish Fed rhetoric and expectations – and isn‘t front running the BoE moves as regards the Fed in the least.

I‘m expecting a sticky CPI and core CPI figure tomorrow – given the price action so far, any potentially positive initial market reaction would be sold into. True, I‘m not looking for such a low CPI figure that would facilitate lasting gains – the sideways trading witnessed currently favors the bears assuming initiative tomorrow. Unless we very decisively close above my 3,635 level with outside markets confirming (unlikely to happen) – if so, I would definitely tweet about that.

Precious metals and miners‘ reversals are gently tipping the scales in the bearish direction when it comes to tomorrow. Silver and copper confirming each other on a daily basis today premarket – that‘s not a bullish sign. No matter the COMEX supplies status, silver isn‘t starting a sizable rally this week, but it‘s brewing. Remember that the white metal is a byproduct of mining for other base metals, and copper inventories aren‘t really high either.

Crude oil is likely to keep turning up – the recent shallow, flag-like correction on the daily chart is close to over, and oil stocks keep their distinct bullish posture as well. Cryptos are basing for now, unwilling to sharply move up – Monday‘s muddle through prediction for Bitcoin and Ethereum over the nearest sessions, is still playing out.

Let‘s bring up the key parting paragraph of yesterday‘s analysis:

(…) That‘s the key to any sustainable S&P 500 rally – calm in the bond markets, and end of the parabolic rise in yields. Too many moving parts though as to what kind of Q4 rally that would translate to. In such an environment, real assets are least vulnerable, and would take to any tightening pause in the kindest manner.