Risk Premium, Poof
S&P 500 recovered the steep losses as the shock was replaced with relief over the international response. Safe haven bids largely disappeared, and can be counted on remaining pressured – this concerns precious metals and crude oil. Credit markets – for all their downswing and forcing the Fed‘s hand through higher yields – have turned risk-on yesterday, but that got reflected just in the tech upswing as value didn‘t close the opening gap.
But that would happen today as money flows out of the dollar hiding, and VIX can be counted on to stay much calmer than it was yesterday, in the days to come – that‘s what I tweeted late yesterday. Today‘s inflation data (core PCE) is going to take a backseat to geopolitics as uncertainty about where these tensions could lead, is getting removed in the markets‘ mind – especially as regards the international ramifications.
Good to have taken sizable gold and oil profits off the table yesterday, well before the risk premiums were gone – fresh portfolio high has been reached.
Remember that in times of high volatility, dialing back your exposure, your risk, is essential to proper risk management. Please have a good look at my style of open trade and money management if you haven‘t already so as to make the most of what I‘m doing.
Let‘s move right into the charts (all courtesy of www.stockcharts.com).
S&P 500 and Nasdaq Outlook
Now, this looks a lot more as an S&P 500 bottom – volatility appears to be staying elevated but headed down next. Neutral to bullish outlook for today but downswings are likely to be repelled.
HYG is marking the risk-on turn clearly, and volume was also solid. Credit markets won‘t be standing in the way of stock market upswing today, I think.
Gold, Silver and Miners
Precious metals ominous lower knot would have consequences for the days to come – but we have seen upswing rejection only, not a downside reversal. When miners catch their breath again, the move higher can continue.
Crude oil upswing has been rejected, but the long base building goes on, and black gold can be counted on to extend gains even when the dust settles down.
Copper upswing would take time to develop, especially now – but the breakout in base metals is on, the inflationary messaging is still there and thriving – yesterday‘s words are still true today, but I am looking for a longer base building here than in crude oil.
Bitcoin and Ethereum
Cryptos are turning the corner, and the worst looks to be in here as well – yesterday‘s attempt to put in a low was successful.
S&P 500 turned around, and the bottom appears to be in. Unless a fresh and entangling escalation materializes (not likely), the markets are willing to shake it off, and erase yesterday‘s downswing. As chips (and international response) fall where they may, the tense air is being removed as markets abhor uncertainty the most. Risk premiums are evaporating, and until the Fed and yields come back into the spotlight, the odds favor risk-on muddying through ahead in the days to follow. The inflation chickens haven‘t though come home to roost, and that has continued bullish implications for real assets.
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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.
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