S&P 500 overcame Thursday‘s Treasury auction setback, breaking above 4,415 with ease – and tech led in spite of yields not really retreating. This is bullish, and Moody‘s outlook downgrade would be shaken off similarly fast. Just review yesterday‘s video where I talked what that means for the dollar and risk assets within the current macro landscape, covering the below areas:
For all the macro noises such as slow deterioration in the job market (continuing claims), openings are still high, wage pressures there, and inflation expectations at consumer level rising. These are all characteristic of latter innings goldilocks as much (mistakenly complacent) mainstream doubts about sticky inflation, persist. This – and super core CPI developments – lend more sense to Powell‘s uncertainty as to whether the Fed is done raising rate (less pronounced bearish factor Tuesday), especially considering that financial conditions have stopped being restrictive.
Yes, advance-decline line is less positive, and percentage of stocks trading below their 50-day moving average together with credit markets could have offered a more bullish picture, but this is what we have – and I dive into the implications in the individual chart sections.
The key data ahead are CPI (Tuesday) and retail sales (Wednesday) – headline would probably keep down to 3.4% YoY, but core is to remain above 4%. PPI would be more to Fed‘s liking, and retail sales are to go slightly negative. All in all, CPI could turn out as bearish stocks (the way I discussed in last week‘s video), and help the dollar above 106 with yields rising too.
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Let‘s move right into the charts (all courtesy of www.stockcharts.com) – today‘s full scale article contains 6 of them, featuring S&P 500, yields, credit markets, precious metals, oil and copper.
S&P 500 and Nasdaq Outlook
The sellers reached only into high 4,350s during the European session, and tech followed by communications and discretionaries led S&P 500 higher, with industrials (my key non-tech pick to do well) in close tow.
Powell‘s hawkish message Thursday wasn‘t really dialed back Friday – long end of the curve keeps retreating, and also short end of the curve is about as high as could be. Of course, that‘s a function of inflation data progression (sticky theme).
Gold, Silver and Miners
Precious metals are very close to the local bottom – and fresh retreat in yields would (now that the dollar is again resting in what could turn out as USD bullish flag) confirm that as much as any flare up in the Middle East (markets are too complacent – with reason). Still, the main driver would be upcoming realization of slowing down growth while inflation accelerates, in other words stagflationary episode.
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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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