Optimistic follow through yesterday brought additional gains to commodities, while stocks and gold treaded water. Just as I wrote yesterday, the celebrations of the tough taper talk being just talk were a little too powerful, prompting modest daily consolidation.
Credit markets point to the risk-on moves to continue, favoring the reflation trades, as yields and inflation expectations would slowly but surely pick up. The U.S. dollar has gone on the defensive again, but look for it to recover some ground. Are the commodities and precious metals bull runs in jeopardy? Not in the least, as the conditions haven't and won't change with the Fed taper plays.
Let's move right into the charts (all courtesy of www.stockcharts.com).
S&P 500 And Nasdaq Outlook
A pause is all we've seen in stocks yesterday, with the NASDAQ Composite hit a little on account of the rising nominal yields. We're likely to see the consolidation to continue next as big moves before Jackson Hole are unlikely.
Credit Markets
High-yield corporate bonds continued the march higher, closing on a strong note again. The daily consolidation hasn't thus far arrived there.
Gold, Silver and Miners
Not too much interesting has happened in the gold sector – only silver joined in the copper and oil upswings. Look for sensitivity in relation to the dollar to continue to a degree as the taper suspense gets resolved.
Crude Oil
The crude oil rebound continues. A little breather next wouldn't be unexpected. Reasonable prices have been reached, and the local bottom is in.
Copper
The copper rebound continues, and stabilization at around 4.25 is very constructive for the bulls.
Bitcoin and Ethereum
Cryptos are biding their time. They haven't breached any important support just yet. As stated yesterday, backing and filling before another upswing wouldn't be at all surprising.
Summary
Before Jackson Hole, I'm not looking for extensive and sustainable moves one way or the other. Return of the risk-on trades should be the lens to view the markets through even though a discreet liquidity tightening is going on under the surface as margin debt data show.