Meeting Resistance

S&P 500 reversed Friday‘s decline, closing below 3,680 – the session was relatively tame, and it was the banking earnings that were instrumental in extending gains aftermarket. Little wonder with such yield spreads – even Cramer then called financials the new stars. While bonds were risk-on, outside markets can‘t be considered as nodding to this S&P 500 rally. Long-dated yields are still rising, and the HYG upswing is likely to run into the Fed still to tighten significantly in Nov and Dec bets as the short end of the curve shows.

Also, far from all earnings ahead this week would allow for such risk taking appetite. Baltic Dry Index is having trouble rising further, and that reflects weaker retail demand ahead. While the consumer is still strong for now, my yesterday‘s thoughts as to earnings and sectoral strength, still apply:

(…) there are still some bright spots in earnings ahead – the tech midcaps seem to be improving, financials didn‘t have a poor week – but above all, healthcare isn‘t looking bad at all. Energy stocks are still on fire, and will be even more. It would be the defensives (utilities and consumer staples) together with communications, that would be lagging ahead.

The S&P 500 relief rally hasn‘t yet reversed, but it‘s hard to get excited about it unless it breaks 3,795-3,810 zone with conviction and confirmation. Bonds look very extended in the risk-on direction, and neither commodities nor precious metals exhibit the same risk appetite, not in the least. While VIX can (and will based on today‘s move) move lower, I favor more selling to appear as we approach the above meaningful resistance zone – put to call ratio is getting to complacent levels slowly but surely.

Thursday‘s Philly Fed data is likely to surprise on the downside, housing would continue to cool, and unemployment claims to rise – these are all leading or coincident indicators while CPI is a lagging one. Hard to derive any other conclusion that the Fed would overdo it on tightening (by looking into this rear view mirror, in the steepest pace of monetary policy change since the mid 1990s). Even if they were to pause now, the effects of tightening already in would take 12 months at least to manifest in full. Hard landing is virtually baked in the cake as the Fed is less sensitive to asset price gyrations than it was in Dec 2018.

This is why I can‘t be bullish at this stage, not when I see bonds pressuring the Fed to do more, when bonds are still disregarding the weakening real economy – Thursday‘s data would be the revealing catalyst of how far this relief rally off the CPI Thursday got ahead of itself.

Precious metals and commodities are in the process of turning, and out of them all, I am of course still most bullish oil, followed by silver (due to outperform in the not too distand future) and copper. Until though the Fed monetary policy / job market catalyst arrives, prolonged basing can be expected – inflation focus going out of the main window, is what‘s required for steep gains again.

Keep enjoying the lively Twitter feed serving you all already in, which comes on top of getting the key daily analytics right into your mailbox. Plenty gets addressed there, but the analyses (whether short or long format, depending on market action – today short) over email are the bedrock, so make sure you‘re signed up for the free newsletter and that you have Twitter notifications turned on so as not to miss any tweets or replies intraday.

Premium content (covered in full within Monica’s Trading Signals) reserved for Monica’s Stock Signals subscribers. Log in to your premium account to read it.
Full scale premium content reserved for Monica’s Trading Signals subscribers. Log in to your premium account to read it.

Thank you for having read today‘s free analysis, which is a small part of the premium Monica’s Trading Signals covering all the markets you’re used to (stocks, bonds, gold, silver, oil, copper, cryptos, USD), and of the premium Monica’s Stock Signals presenting stocks and bonds only. Both publications feature real-time trade calls and intraday updates.
Subscribe to the free Monica‘s Insider Club for instant publishing notifications and other content useful for making your own trade moves on top of my extra Twitter feed tips. Thanks for subscribing & all your support that makes this great ride possible!

Thank you,

Monica Kingsley
Stock Trading Signals
Gold Trading Signals
Oil Trading Signals

Copper Trading Signals
Bitcoin Trading Signals


* * * * *

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.

Sign Up for Monica’s Insider Club!

It’s free and you’ll get my message right when a new post goes up.

Scroll to Top