Boe Déjà Vu

S&P 500 plunged on rising volume yesterday – even without bond markets being open. HYG sent out a clear message yesterday with its one way way slide – we‘re still in risk-off mode, USD keeps rising, and the sentiment at the onset of European session represented that. It‘s been since then somewhat dialed back by yet another Bank of England announcement that makes the waiting doves across the world salivate. It‘s though too early for the Fed to relent – ECB is the prime U-turn candidate next, and even when it comes to Europe, I‘m not expecting such a move in a matter of days in the slightest.

So far, markets aren‘t ecstatic – it remains to be seen whether a solid bid materializes at all, and survives the opening 60 min. Odds are that such a rally would be of shorter shelf life than when the first BoE move was announced – there is no jubilation in precious metals yet to speak of. It‘s simply clear that the strains present in Europe aren‘t forcing the Fed‘s hand, therefore I‘m looking for the sellers to lose a little steam in the run up to Friday‘s CPI. And if no relief to speak of materializes after the stock market open, then this abundance of caution I‘m describing the above scenario with, would be quickly revealed and overpowered with more selling until long-dated yields stabilize with TLT truly turning around.

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.

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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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