Riding out inflation in style

S&P 500 refused further downside, tech caught fire, and credit markets staged a risk-on reversal. The bond upswing is the most important element – Powell‘s testimony wasn‘t able to ignite further rise in yields at the moment.

Couple that with continued energy surge, and we‘re looking at real assets being very favorably positioned here (relatively easiest gains ahead), and that has profitable consequences for oil, copper and precious metals bulls. Even cryptos like the fact that CPI didn‘t come above expectations.

Stock market fate is though tied to the Treasuries and corporate bonds – keeping an eye on the tech sensitivity to both advancing and retreating yields is of paramount importance, with financials not sticking higher as a sore thumb among other S&P 500 sectors being the other.

Let‘s move right into the charts.

S&P 500 and Nasdaq outlook

Fresh attempt at the lows was repelled, and the bulls aren‘t looking too spooked. Market breadth hasn‘t plunged to new lows, and is being slowly improved. It looks like we‘re about to keep moving up before the bears return.

Credit markets

HYG reversal looks credible, even if the volume was lower. It‘s risk on as HYG outperformed – the next question is how would it fare when yields rise again.

Gold, silver and miners

Gold and silver position is improving, and I like it that miners keep coming alive. As written yesterday, the stage is set for upswing continuation till we break out of the very long consolidation.

Crude oil

Crude oil is performing just right – breaking higher from the prior flag-like structure, and simultaneously being inspired by the oil stocks example – $80 resistance has been decisively taken out.

Copper

Looking at today‘s price action, the time of copper playing catch up to the other commodities has arrived already – the bears indeed aren‘t likely to enjoy much success over the coming months.

Bitcoin and Ethereum

Bitcoin and Ethereum are turning a corner, but animal spirits aren‘t there now – are cryptos more aware of the coming liquidity challenges? The rebound is lacking fervor still.

Summary

S&P 500 turnaround succeeded, and markets are choosing to ignore the hawkish Fed and high inflation data. That‘s all good for commodities and then precious metals, but would catch up with stocks over time – in the sense that paper assets would underperform. For now, the S&P 500 bears have been repelled, and it would take a fresh round of higher yields forcing tech down, to knock the 500-strong index lower, which isn‘t likely to happen today. Overall, we‘re looking at still a good year in stocks (check the Latest Highlights for big picture picks), but 2H 2022 would be calmer than the prior 180 days.