S&P 500 duly rallied on broad strength, and credit markets performance bodes well for all risk-on assets. Now a little consolidation after yesterday‘s steep gains is ahead, but I don‘t see it as derailing future gains. The stock bull run isn‘t over, and doesn‘t need the infrastructure bill for its further advance, price action shows.
The VIX is calming down, now around 21 with further room to decline still – at least as far as the remainder of 2021 is concerned. Commodities remain in rally mode after the recent correction, and crude oil sending a bullish message (and not one of fear) is a welcome sign. The same goes for copper moving in sync with the rest of the commodities – and that has positive implications for silver too. Precious metals though still remain a patience trade, where the risks of being out of the markets outweight those of being in – it‘s a bet on the Fed making a wrong tapering / tightening move – with the market figuring out so beforehand. It sure would come as the compressing yield spreads reveal that is the greatest fear, but we aren‘t there yet. Finally, cryptos cautious mood today illustrates the certainly less exciting session just ahead than was the case yesterday.
Let‘s move right into the charts (all courtesy of www.stockcharts.com).
S&P 500 and Nasdaq Outlook
S&P 500 has woken up, and indeed surpassed the 50-day moving average. The lower volume isn‘t an issue, but a little consolidation is ahead today – not a steep rally continuation.
HYG jumped higher in a giant risk-on nod that is further confirmed by the quality bonds performance. Again, I‘m looking for a little consolidation here today as well.
Gold, Silver and Miners
Gold downswing isn‘t to be taken at all seriously – I‘m looking for more gains in both the yellow and white metals, at their own and relatively slow pace. The countdown to Fed policy mistake and inflation returning to the limelight, is on.
Crude oil scored a nice upswing, oil stocks confirmed as well the return of strength into the stock market, and both black gold and S&P 500 can keep rising together over the next days. Chances are the $72 area setback could be coming back into play still this week.
Copper keeps agreeing with the risk-on turn, and is certainly primed to go much higher over the nearest weeks and months. Similarly to uranium, I remain bullish on the sector, especially since copper, silver, nickel and lithium are all green economy preconditions.
Bitcoin and Ethereum
Bitcoin and Ethereum time to consolidate yesterday‘s gains, is here – and I‘m not looking for a bullish picture based on Ethereum performance. Sideways to a little down, that‘s the most likely outcome before the bulls move again.
Consolidation of yesterday‘s steep S&P 500 and commodity gains is ahead for today, but the Santa Claus rally is by no means over. Even if oil and cryptos hesitate a little, the constructive message from bonds and copper is overpowering that in my view. As explained in detail within the opening part of today‘s analysis, the bulls have to odds to keep moving – and will likely take advantage thereof before the year is over.
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