The S&P 500 reached new highs powered by technology, even as Russell 2000 took a daily breather. With CBOE Volatility Index going nowhere, and the put-call ratio turning complacent, the path of least resistance remains higher. Not even emerging markets are derailed by the strong U.S. dollar. While yesterday's stock market upswing was a defensive move as the credit markets and tech internals reveal, there is little to upset the cart. Thursday's ISM manufacturing will probably show solid expansion, and it will be Friday's non-farm payrolls that could bring about volatile trading.
With the Fed support intact and inflation expectations not spiking, the current data are disregarded to a degree.
The Fed is behind the curve in taking on inflation. Its monetary actions support both the Treasury markets and the red-hot real estate. The lull in Treasuries is likely to last into the autumn, and the ensuing yields increase would reflect both the economic recovery and newfound appreciation of inflation. I maintain we're still in reflation – a period of economic growth stronger than inflation. We're in a multi-year economic expansion. As a side note, if only consumer price inflation was measured without substitution, adjustments and owner‘s equivalent rent. In this environment, tech is unlikely to be derailed, and value will play catch up.
Precious metals are feeling the heat of inflation., Miners are leading to the downside – not a bullish short-term perspective. Silver is inspired by copper's short-term woes more than by the CRB resilience. Coupled with the dollar keeping high ground, both metals are facing stiff headwinds.
Crude oil is likely to shake off the uncertainty of the production quota increase. The correction has been thus far muted, with oil stocks bearing the brunt of the selling pressure. But that's nothing that couldn't be repaired over the nearest weeks. Energy Select Sector SPDR® Fund (NYSE:XLE) will contribute to stock market gains, and black gold would remain way more resilient than oil stocks.
Cryptos are scoring gains as the base-building hypothesis grows in strength, and the bulls have the initiative.
Let‘s move right into the charts (all courtesy of www.stockcharts.com).
Gold, Silver And Miners
Gold and miners still keep going nowhere, and the creeping deterioration is increasing the danger of a broader short-term decline.
Also the GDX (NYSE:GDX):GLD (NYSE:GLD) ratio reflects the momentary straits in the precious metals market. Silver remains under pressure as much as copper does.
Bitcoin And Ethereum
Quite a few good days in a row in the crypto space. The bulls are on the move.
Summary
The S&P 500 keeps consolidating yesterday's late session gains, preparing for a fresh upswing.
Gold and silver are on the defensive in the short-term, and miners aren't pointing in the bullish direction at the moment. Precious metals keep ignoring real rates and inflation.
Crude oil chart remains bullish, and the steep energy sector decline won't last.
Bitcoin and Ethereum are scoring gains as the base-building hypothesis grows in strength. Overcoming the recent corrective highs followed by the 200-day moving averages are the next medium-term objectives.