Breaking News
0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Are We On The Verge Of Stocks Pullback?

By Monica KingsleyStock MarketsApr 07, 2021 12:42PM ET
www.investing.com/analysis/are-we-on-the-verge-of-stocks-pullback-200571769
Are We On The Verge Of Stocks Pullback?
By Monica Kingsley   |  Apr 07, 2021 12:42PM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 

S&P 500 is still consolidating Monday's sharp gains. Yet, it seems that eking out further gains is getting harder as the price action took the index quite far from its key moving averages. If I had to pick one sign of stiffer headwinds ahead, it would be the tech sector's reaction to another daily retreat in Treasury yields. The sector didn't rally, and neither did the Dow Jones Industrial Average. Value stocks saved the day, and it appears we're about to see them start doing better again, relatively speaking.

Yes, the risk-reward ratio for the bulls is at unsavory levels in the short run. What about being short at this moment then? It all depends upon the trading style, risk tolerance and time horizon. I'm not looking for stocks making a major top here as the bull run is intact.

My prognosis for yesterday's session materialized, and we have seen quite a record number (around 95%) of stocks trading above their 200-day moving averages, which is similar to the setup right after the post-dotcom bubble bear market 2002/3 lows, or 1-2 years after the bull market run off the March 2009 lows. Hard to say which one is more hated, but I see the run from March 2020 generational low as the gold medal winner, especially given the denial accompanying it since.

Gold made a run above $1,740 in line with retreating yields and copper not giving up much gained ground, but the immediate run‘s continuation to the key $1,760s or even better above $1,775 looks set to have to wait for a few sessions. I don't expect today's FOMC minutes release to change that. While the metals are likely to take their time, the healthy miners' outperformance supports its continuation once the soft patch we appear entering, is over.

The dollar downswing is playing out, putting a floor below the commodities, which are undergoing a much needed correction from their late February top. It's not over yet, and the shy AUD/USD upswing is but one clue. Given the oil price meandering around $60 (by the way, not even the unlikely decline to $52 would break black gold's bull run), the USD/CAD performance as of late is disappointing, as the greenback got mostly stronger since mid March. More patience in the commodities arena appears probable as we're waiting for both Treasury yields and inflation expectations to start rising again.

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

Gold And Silver

Gold Daily Chart.
Gold Daily Chart.

Gold‘s Force index finally crossed into positive territory, but the yellow metal isn't taking yet advantage of retreating yields in a visually outstanding way. Quite some resistance in the $1,740s needs to be cleared first, which would likely take a while, but the rally's internals are still on the bulls' side.

Gold Daily Chart.
Gold Daily Chart.

Gold miners keep strongly outperforming the yellow metal, with the seniors (GDX (NYSE:GDX) ETF) doing particularly great – better than gold juniors or silver miners. Seeing signs of the silver sector getting too ahead, wouldn‘t likely be bullish at all unless sustained – at the current stage, I can‘t underline these words enough in the ongoing physical silver squeeze.

Gold To Silver Ratios

Gold-Silver Ratio Daily Chart.
Gold-Silver Ratio Daily Chart.

Since the gold bottom was hit in early March (that's still the leading hypothesis), the precious metals' leadership has moved to the yellow metal – and it's visible in both the gold-to-silver ratio and gold miners to silver miners one. The time for the white metal to (out)shine would come, but clearly isn't and won't be here any day now.

Summary

Precious metals are likely to run into short-term headwinds before clearing out the next major set of resistances above $1,760s. The upswing though remains healthy and progressing, and will be led by the gold sector.

S&P 500 is likely to keep consolidating gained ground, and (shallow) bear raids wouldn'‘t be unexpected here – in spite of solid corporate credit markets performance. Yet, it's the extraordinary nature of VIX trading and put/call ratio moves, that point to the bull market run as intact and merely in need of a breather.

Are We On The Verge Of Stocks Pullback?
 

Related Articles

Gary S. Morrow
Copart Breakout? By Gary S. Morrow - Apr 09, 2021

Copart Inc (NASDAQ:CPRT) is extending Thursday’s trendline break. This key overhead trendline links the January and February highs. With solid footing underneath we believe...

Are We On The Verge Of Stocks Pullback?

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Comments (6)
Monica Kingsley
Monica Kingsley Apr 08, 2021 8:02PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
I apolozige, by a technical quirk, I was unable to comment and respond. Should be fine now.
Dwain Hobbs
Dwain Hobbs Apr 07, 2021 5:46PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Good read ,,, expecting higher US 10y yields , higher dollar , which in turn pressures the stocmarket for a while,, will be interesting to see if gold can buck the trend and move higher with the dollar ,, silver is anyones guess !
Monica Kingsley
Monica Kingsley Apr 07, 2021 5:46PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Dear Dwain, thank you very much! Thus far, the constellation for gold remains good, and I discuss that in today's article. Right, I prefer gold getting its house in order first.
peter neal
peter neal Apr 07, 2021 4:29PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
All Physical Gold is sold out if that means anything.
Forex Harbingers
Forex Harbingers Apr 07, 2021 4:29PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
yeah, gold rocket soon. No supply, high demand. Recipe for a parabolic rise in the near future
Monica Kingsley
Monica Kingsley Apr 07, 2021 4:29PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
I would say, it's a... sign of the times.
Forex Harbingers
Forex Harbingers Apr 07, 2021 1:48PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
One last plunge baby. Hello Monica, let me ask, are you seeing what I'm seeing on monthly charts? Dollar seems it will go through an extended strength faze after this year. I see a lot of currencies multi year trends broken within this last month.
Monica Kingsley
Monica Kingsley Apr 07, 2021 1:48PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
I am doubting that one last PMs plunge still. Let's see how low USD goes this year - first, on the defensive really. Then, I'll be clearer about 2022
Allen tran
Allen tran Apr 07, 2021 1:00PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Appreciated
Monica Kingsley
Monica Kingsley Apr 07, 2021 1:00PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Thank you and sorry for being unable to respond earlier/
Richard Clinton
Richard Clinton Apr 07, 2021 12:49PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Thank you Monica! I always appreciate your perspective.
Monica Kingsley
Monica Kingsley Apr 07, 2021 12:49PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Thank you and sorry for being unable to respond earlier/
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email