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Absorbing Interest Rate Shock

S&P 500 and all its sectors slid yesterday without as much as a brief visit to 4,420s at the open – straight down through yesterday given 4,385 premium level, with Russell 2000 showing no signs of life. 10y yield of 4.50% has been reached, risk assets repricing is underway, and this is how I view the upcoming yield path, including it being only recession that can bring yields down somewhat. And given the goldilocks economy and the discussed elements behind the rise in yields – BoJ yield curve control (no move today there really), hawkish clarity of Powell‘s intentions, and returning inflation, are all set to make a Nov rate hike have better odds than a coin toss (there is still one more hike this year coming).

The upcoming flash PMIs are likely to show continued improvement in the economy, which would on market‘s second thought feed into more Fed room for tightening. Note how little attention is being paid to rising TIPS (real rate of return as a competitor to stocks), profit margins and the troubled outlook for Q4 earnings calls with forward guidance especially – that‘s big picture bearish.

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Let‘s move right into the charts (all courtesy of www.stockcharts.com) – today‘s full scale article contains 4 of them.

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Gold, Silver and Miners

gold, silver and miners

Gold would have much trouble rising with such rates, but given that the dollar top is as many weeks away as things start to break (concern chiefly for 2024), I would be patient about signs of decoupling from yields emerging. For now, I‘m not counting on $1,960 early next week, yet silver is likely to defend $23.70 on a closing basis today. Copper did test the lower support of $3.65, and will have trouble overcoming $3.75 again. The red metal belongs among the more vulnerable ones post FOMC.

Crude Oil

crude oil

Crude oil is still bullishly consolidating, and the tide hasn‘t shifted. Any break of $88.50 would prove temporary, and not reaching as deep as $85.50 – and the chart doesn‘t favor that deep a pullback anyway. $93 is closer, and will take a couple of weeks to reach.

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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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