One more day of upside rejection for the S&P 500, in what is now quite a long stretch of prices going mostly sideways. As unsteady as the VIX seems at the moment, it doesn't flash any sign of spiking in this data-light week, and neither does the put/call ratio. As I wrote yesterday about the selling pressure, these tight-range days accompanied by 30ish-point corrections are as good as it gets when the Fed still has its foot on the accelerate pedal.
Yes, you can ignore the Kaplan trial balloon that spiked the U.S. dollar on Friday but didn't put a solid floor before long-dated Treasuries as seen in their intraday reversal.
The gold market enjoyed its fireworks, aided mightily by the silver squeeze run. The inflation theme is getting increasing attention, and commodities are on the run across the board. Just check yesterday's oil analysis or my bullish copper calls. I could just as easily say that copper is the new gold. It has been certainly acting as such over the past many months, yet the yellow metal's time in the limelight is about here.
When it comes to USD/JPY support for the unfolding precious metals upswing, we indeed got the reversal of Friday‘s USD upside:
(…) The taper story being revealed for a trial balloon that it is, would quickly reverse Friday‘s sharp USDX gains, where particularly the USD/JPY segment is worth watching.
Let‘s move right into the charts (all courtesy of www.stockcharts.com).
Gold and Miners Short-Term
Volume returned into the gold market, and so did miners' outperformance. While these didn't close anywhere near their mid-April highs, they extremely underperformed on Friday. What happens over the next few sessions will provide a clue as to whether strength genuinely returned yesterday.
Gold and Miners Long-Term
The copper to 10-year Treasury yield is edging higher again, and the miners-to-gold ratio strongly rebounded, proving my point that the real parallels are the 2018 and 2019 gyrations, not the uniquely deflationary corona crash.
Summary
The S&P 500 remains vulnerable to short-term spikes in both directions, but the medium-term picture remains positive. The strong gains since late March are being worked off here before another upswing.
Gold and miners proved themselves yesterday, and scored strong gains in a universally supportive array of signals across commodities, Treasuries, and also the USD/JPY daily move. It is well worth not retiring the benefit of the doubt given to the precious metals bulls. More gains are in sight.