Best of the Week
Most Popular
1. TESLA! Cathy Wood ARK Funds Bubble BURSTS! - 12th May 21
2.Stock Market Entering Early Summer Correction Trend Forecast - 10th May 21
3.GOLD GDX, HUI Stocks - Will Paradise Turn into a Dystopia? - 11th May 21
4.Crypto Bubble Bursts! Nicehash Suspends Coinbase Withdrawals, Bitcoin, Ethereum Bear Market Begins - 16th May 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.Cathy Wood Ark Invest Funds Bubble BURSTS! ARKK, ARKG, Tesla Entering Severe Bear Market - 13th May 21
7.Stock Market - Should You Be In Cash Right Now? - 17th May 21
8.Gold to Benefit from Mounting US Debt Pile - 14th May 21
9.Coronavius Covid-19 in Italy in August 2019! - 13th May 21
10.How to Invest in HIGH RISK Tech Stocks for 2021 and Beyond - Part 2 of 2 - 18th May 21
Last 7 days
Transitory Inflation Debate - 15th Jun 21
USDX: The Cleanest Shirt Among the Dirty Laundry - 15th Jun 21
Inflation and Stock Market SPX Record Highs. PPI, FOMC Meeting in Focus - 15th Jun 21
Stock Market SPX 4310 Right Around the Corner! - 15th Jun 21
AI Stocks Strength vs Weakness - Why Selling Google or Facebook is a Big Mistake! - 14th Jun 21
The Bitcoin Crime Wave Hits - 14th Jun 21
Gold Time for Consolidation and Lower Volatility - 14th Jun 21
More Banks & Investors Are NOT Believing Fed Propaganda - 14th Jun 21
Market Inflation Bets – Squaring or Not - 14th Jun 21
Is Gold Really an Inflation Hedge? - 14th Jun 21
The FED Holds the Market. How Long Will It Last? - 14th Jun 21
Coinbase vs Binance for Bitcoin, Ethereum Crypto Trading & Investing During Bear Market 2021 - 11th Jun 21
Gold Price $4000 – Insurance, A Hedge, An Investment - 11th Jun 21
What Drives Gold Prices? (Don't Say "the Fed!") - 11th Jun 21
Why You Need to Buy and Hold Gold Now - 11th Jun 21
Big Pharma Is Back! Biotech Skyrockets On Biogen’s New Alzheimer Drug Approval - 11th Jun 21
Top 5 AI Tech Stocks Trend Analysis, Buying Levels, Ratings and Valuations - 10th Jun 21
Gold’s Inflation Utility - 10th Jun 21
The Fuel Of The Future That’s 9 Times More Efficient Than Lithium - 10th Jun 21
Challenges facing the law industry in 2021 - 10th Jun 21
SELL USDT Tether Before Ponzi Scheme Implodes Triggering 90% Bitcoin CRASH in Cryptos Lehman Bros - 9th Jun 21
Stock Market Sentiment Speaks: Prepare For Volatility - 9th Jun 21
Gold Mining Stocks: Which Door Will Investors Choose? - 9th Jun 21
Fed ‘Taper’ Talk Is Back: Will a Tantrum Follow? - 9th Jun 21
Scientists Discover New Renewable Fuel 3 Times More Powerful Than Gasoline - 9th Jun 21
How do I Choose an Online Trading Broker? - 9th Jun 21
Fed’s Tools are Broken - 8th Jun 21
Stock Market Approaching an Intermediate peak! - 8th Jun 21
Could This Household Chemical Become The Superfuel Of The Future? - 8th Jun 21
The Return of Inflation. Can Gold Withstand the Dark Side? - 7th Jun 21
Why "Trouble is Brewing" for the U.S. Housing Market - 7th Jun 21
Stock Market Volatility Crash Course (VIX vs VVIX) – Learn How to Profit From Volatility - 7th Jun 21
Computer Vision Is Like Investing in the Internet in the ‘90s - 7th Jun 21
MAPLINS - Sheffield Down Memory Lane, Before the Shop Closed its Doors for the Last Time - 7th Jun 21
Wire Brush vs Block Paving Driveway Weeds - How Much Work, Nest Way to Kill Weeds? - 7th Jun 21
When Markets Get Scared and Reverse - 7th Jun 21
Is A New Superfuel About To Take Over Energy Markets? - 7th Jun 21
Why Tether USDT, Stable Scam Coins Could COLLAPSE the Crypto Markets - Black Swan 2021 - 6th Jun 21
Stock Market: 4 Tips for Investing in Gold - 6th Jun 21
Apple (AAPL) Summer Correction Stock Trend Analysis - 5th Jun 21
Stock Market Sentiment Speaks: I 'Believe' We Rally Into A June Swoon - 5th Jun 21
Stock Market Russell 2000 After Reaching A Trend Channel High Flags Out - 5th Jun 21
Money Is Cheap, Own Gold - 5th Jun 21
Bitcoin and Ravencoin Cryptos CRASH Bear Market Buying Levels Price Targets - 4th Jun 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Inflation Easing, Now What?

Economics / Inflation May 26, 2021 - 12:32 PM GMT

By: Monica_Kingsley

Economics

S&P 500 refused to keep early gains, and reversed back into no man‘s land – on little convincing volume. For now, we remain chopping below my 4,180s level, conquering which on a closing basis would a bullish achievement. Until that happens on convincing internals, fake moves in both directions would remain with us.

The Fed telegraphing the talk about talking taper is a first step in preparing the markets not to get surprised by the actual deed, but how far is that one really? Stocks, bonds and currencies aren‘t reacting much – it‘s only commodities that are in consolidation mode, but this can be chalked down to inflation expectations calming down over the prior three trading days. Until the Fed truly moves or makes its forward guidance as unequivocal as can be in this respect, the markets would be in a doubting attitude (or at a minimum, a wait and see one):

(…) The market simply isn‘t convinced the Fed is serious about taking on inflation through (gradual) removal of the punch bowl – or about shaping its forward guidance credibly this way (yet). Inflation expectations are cooling down a little, and the Treasury market is tracking them closely. But this doesn‘t mean that bonds are taking the central bank seriously – this move is part and parcel of the transitory vs. getting (practically permanently unless a Fed game changer arrives – still unlikely) elevated inflation readings debate.

While I think that the red hot CPI inflation would die down a little (i.e. not keep rising ever as steeply as was the case with Wednesday‘s data) once the year on year base to compare it against normalizes, a permanently elevated plateau of high and rising inflation would be a reality for more than foreseeable future simply because the Fed would be as behind as Arthur Burns was in fighting the 1970s inflation, and upward price pressures in the job market pressures would kick in.



Thus, look for the Treasury market calm to continue, affecting the defensive sectors and to a certain degree tech too. Technology isn‘t being rotated to anyhow strongly – the reopening trades are the star performers as $NYFANG lags behind. Tech though rebounded off very oversold levels, and isn‘t likely to revisit them. That‘s the essence of my (moderately but still) bullish Nasdaq calls and open S&P 500 profitable positions.

Gold and silver have been going different ways, with the white metal driven by commodities giving off air. The gold sector though remains well positioned as the miners keep more or less pulling ahead, nominal yields aren‘t rushing headlong to the upside, and inflation isn‘t turning around. Copper relative to the 10-year Treasury yield remains a watchout, with the red metal relevant especially to silver. For now, gold remains a coiled spring with limited downside until conditions materially change, and my open gold profits can keep growing at their own pace.

Crude oil found a daily bottom that looks promising to hold at first sight, but the oil index ($XOI) gave up all of its intraday gains. In this light, the $WTIC rebound looks a bit stronger short-term than could have been expected, meaning that a downswing attempt in black gold can‘t be excluded. At the same time, upside potential is greater though.

Bitcoin made one more attempt on Wednesday‘s lows on Sunday, and Ethereum undershot them. Both have swung higher but remain well below Friday‘s levels – the lookout remains tense until at least $38,000 in Bitcoin and $2,400 in Ethereum are taken out convincingly.

Let‘s move right into the charts (all courtesy of www.stockcharts.com).

S&P 500 Outlook



S&P 500 didn‘t undergo a reversal on Friday, the volume or conviction of the sellers wasn‘t there. Contrast that with Nasdaq (black line), and the turn lower looks menacing – at first sight only. There wasn‘t any real volume to talk of in QQQ (and neither in SPY for that matter). Tech overall would keep underperforming, but has been beaten down a bit too much.

Credit Markets

  1. High yield corporate bonds performed better than the investment grade ones while long-dated Treasury yields once again retreated. The sentiment is turning back to risk-on.

Technology and Value



Tech driven by its riskier segments keeps rising while $NYFANG did drag its feet on Friday. Value though saved the day in spite of giving up all intraday gains as TLT repelled its bears.

Gold, Silver and Miners



Gold sector is cooling off without giving up gained ground. Miners aren‘t leading to the downside while nominal yields could provide a greater tailwind to the yellow metal. Thanks to inflation expectations and commodities at the moment, it doesn‘t.



Silver is lately losing altitude as much as copper does, but the red metal‘s ratio to 10-year Treasury yield isn‘t pulling the yellow metal down – because of real rates barely changing.

Crude Oil



Crude oil is basing, and the forces between the bulls and bears are more than even now – current prices are attracting buying interest, which might however take a while to materialize in sustainably higher prices unless the oil index recovers too.

Summary

S&P 500 bulls remain supported by the credit markets, with value pulling ahead again while tech‘s worst clearly appears over. Time to be bullish both the 500-strong index and look for a Nasdaq entry point as this April started sideways trading full of fake breaks higher or lower, is slowly drawing to its end.

Gold and miners defend gained ground, but look for silver to remain vulnerable to the downside thanks to the pressure on commodities that I expect from both the bond markets and inflation expectation moves.

Crude oil is stabilizing and the oil index supports higher prices, but one more pullback might be on the cards. And should commodities turn red en masse again, black gold wouldn‘t probably escape.

Neither Bitcoin nor Ethereum have truly stabilized yet, and remain short-term range bound with more selling pressure a distinct possibility. While the worst appears over on a very short-term basis, the dust hasn‘t settled just yet.

Thank you for having read today‘s free analysis, which is available in full at my homesite. There, you can subscribe to the free Monica‘s Insider Club, which features real-time trade calls and intraday updates for both Stock Trading Signals and Gold Trading Signals.

Monica Kingsley

Stock Trading Signals

Gold Trading Signals

www.monicakingsley.co
mk@monicakingsley.co

* * * * *

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.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in