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Fake Breakdown

S&P 500 bears couldn‘t follow through, and the bond market downswing looks tired – starting off a risk-on base, never quite flipping risk-off. Perhaps best of all, tech saved its bullets, and is ready to join when TLT comes back and erases Friday‘s modest decline on low volume. The usual „suspects“ continue doing well – energy, healthcare, consumer staples, materials and industrials – best picks for what‘s to come in the remaining part of this rally.

It can and still will go on – all the mixed Fed messaging in the prior week won‘t stop it, signs of decelerating inflation would continue popping up (to accompany PPI) while speculation would continue as to when exactly would a recession arrive. Approaching, not yet here except for housing, manufacturing etc that feel the pain already – remember, job market is the last to roll over (non-farm payrolls – unemployment claims are actually leading). The gyrating bets on Fed taking its foot off the pedal, are the ingredient that can power stocks higher before earnings start to bite next year.

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Let‘s move right into the charts (all courtesy of www.stockcharts.com).

S&P 500 and Nasdaq Outlook

S&P 500 and Nasdaq

Fake breakdown was indeed the result of what I wrote here Friday morning. 4,000 are on the chopping block this week.

Credit Markets

HYG, LQD and TLT

For now, both the retreat in yields and general risk-on posture in bonds, can continue. Still a lot of institutional money on the sidelines that needs to be invested before year end – both in stocks and bonds.

Gold, Silver and Miners

gold, silver and miners

This doesn‘t look like the end of a major counter trend rally – higher highs have been made while fresh lows… not exactly. The tide has turned, and precious metals would focus increasingly more on the high debt servicing costs in anticipation of yet another Fed turn (in support of the economy and fiscal deficits that would grow during recessions) no matter whether 5% or 5.50% Fed funds rate is reached after Mar FOMC – see how little decline happened from Jul lows and where rates were back then.

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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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