By Monica Kingsley. Originally published at ValueWalk.
S&P 500 recovered opening setback fast, and daily volume slightly increased. Bonds though didn‘t follow in the enthusiasm nearly as much – the short-term stock market balance is tight, but I expect the bears to show their upper hand in the run up to tomorrow‘s ECB moves. Even the eurozone (some might say especially the eurozone) has to join in to some degree in the tightening – the Yellen admissions of getting the transitory inflation wrong, are impossible to miss. If you had known me since time immemorial, you had been ready as I covered this first in mid 2020, calling for inflation to be persistent and running.
So, stocks are still facing the tightening Fed phase, not yet smelling the Fed pivot – the downside can reach further still, and the new battle for 4,080 is approaching. Odds are we would head that way before mid-session tomorrow – today, I‘m looking for a lackluster, paring the gains, session in stocks. And that holds true for precious metals as well – Monday‘s decline was duly reversed, and copper is carving out a local bottom as we speak. Crude oil is of course offering only shallow corrections, and didn‘t make it much below $117.50. Energy keeps running, and it ain‘t over by a long shot – when it comes to time though, I‘m looking for the rally to last a few short months more before taking even greater toll toll on the real economy, and starting to decline somewhat.
Cryptos are refusing to decline much, and that illustrates the current balance of power nicely – larger moves are unlikely. Friday‘s CPI awaits, and it would likely show limited Fed room to back off tightening – Treasuries aren‘t waiting, and keep requesting more rate hikes. The daily price action between different maturities illustrates the building strains. In this environment, sticking with real assets while favoring the short side in stock indices, is the reasonable positioning.
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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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