Ringing the bell

S&P 500 strongly rallied after a precipitous drop to 3,500s on CPI data coming in predictably above expectations. I looked for high inflation data, and especially high core CPI data and these played into the hawkish Fed expectations, further strengthening them as the short end of the curve reveals.

The selling pressure though stalled, and the modest rebound that could have rolled over in the 3,560s as I indicated was a good place for it to happen, didn‘t materialize. The sellers were swiftly overpowered, and an hour later I declared that attempt as failed, with buyers moving in quickly. Two hours after that, I talked bullish bias into the closing bell, aftermarket and premarket. S&P 500 has made good progress since, reaching 70+ points higher after the original bullish call.

Could this be the start of the Q4 rally pinned to start on CPI figures the preceding Monday?

The technicals and seasonals would support that, the S&P 500 chart offered signs of bottoming – I had been talking about the conditions for a rally being in place, and that now it would be only about whether they get acted upon or not.

And in spite of the bond market performance yesterday, it appears to be the case. Or precisely because of the performance, because of the intraday dynamics – HYG sharply recovered the opening setback, mirroring that S&P 500 upswing. It‘s not an issue that Nasdaq lagged a little – the cyclicals did well, it‘s sectorally apparent that bullish spirits have come back yesterday.

I‘m indeed leaning towards this being the real Q4 rally start – still a bear market rally that would fail, but would be lasting enough to build confidence on par with the failed summer rally as I talked Monday. Daily consolidation with decent bullish bias to be seen Friday as the still okay retail data hint at, would be a welcome sight as fresh longs would enter the market. Not even the strong upswing in the dollar today is an issue – look how fine cryptos are shaking it off, and precious metals would be next in line to do so. Silver is bidding its time, but we‘re slowly approaching a sizable rally in the white metal starting. Copper is doing very fine, the yesterday opened long position is in the black already, and has turned the corner too.

Crude oil is for now consolidating around the 50-day moving average, and the $92 resistance awaits – it will be easily overcome once the dollar pauses on a daily basis, but I agree that yesterday‘s WTIC upswing on low volume hints at that to happen probably not in the very opening part of next week. The nice rounded bottom with a fake breakdown is over, and black gold is climbing higher now again, slowly but surely – with natgas still bullish as well.