S&P 500 declined, with tech holding up best – the volatility spike is here as Evergrande fears join real economy deceleration. Both paper and real assets took it on the chin, and yields together with the dollar rose. As for greenback and Treasuries upcoming price path:
(…) Treasury yields moved up, but don’t expect to see them gallop just yet. Slow and steady, orderly grind higher is the most likely trajectory ahead, and even that won’t propel the dollar higher or keep it really afloat. Greenback’s support is at 91.70, and I’m looking for it to give in over the nearest weeks, which carries tremendous implications for commodity and precious metals trades. And for risk assets in general.
Precious metals, copper, and oil bore the brunt of souring sentiment, with cryptocurrencies joining in the slide later through the day. But have the material facts changed, or all we got was a whiff of risk-off? September is likely to be volatile, seasonally is, and August was a surprisingly calm month. You know what they say about periods of lower volatility giving way to those of higher readings… time to buckle up.
Let’s move right into the charts (all courtesy of www.stockcharts.com).
S&P 500 and Nasdaq Outlook
The S&P 500 downswing was a value-driven one. Risk-on has to wait for now.
The credit market slide would have to stop before the stock market bulls can think about recovery. In fact, yesterday’s picture gives a daily scare impression.
Gold, Silver, and Miners
Higher yields and rush into the dollar hurt precious metals, but I’m not looking for a fresh and steep-down leg to start here. When the momentary sense of panic calms down (it can happen relatively fast), precious metals would have an easier time rising on the monetary policy and inflation projections.
Crude oil ran into another setback, but the buying interest bodes well – I’m looking for a gradual price recovery to continue.
While copper is hurt by the weakening real economy and underperforming the CRB Index, commodities haven’t rolled over to the downside – the commodities superbull remains intact. Copper bulls are bidding their time and would likely step in on the heels of positive news out of China.
Bitcoin and Ethereum
Bitcoin looks to have found a temporary floor, but it would be very premature to declare a fresh upswing to be about to start – medium-term chart damage has been done.
Yesterday’s risk-off day became likely to get at least partially reversed today. I’m not looking for it to break the stock market and commodity bull runs. As for precious metals and cryptos, I’m looking for their recovery to start in earnest once the dollar and yields once again paint a favorable picture.
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All essays, research, and information represent analyses and opinions of Monica Kingsley that are based on availability and the 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. It should not be relied upon as advice or construed as providing recommendations of any kind. Moreover, futures, stocks, and options are financial instruments not suitable for every investor.
Please know that you invest at your own risk. Monica Kingsley is not a Registered Securities Advisor. By reading her writings, you agree that she is not held responsible or liable for any decisions you make. Investing, trading, and speculating in financial markets may involve a high risk of loss. Monica Kingsley may have a short or long position in any securities, including those mentioned in her writings. She may make additional purchases and/or sales of those securities without notice.
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