A bit of selling at the open, and off to new highs – the S&P 500 bulls are taking no prisoners. The long recent consolidation has been broken, and it was again to the upside. Option traders are still having a hard time agreeing with the declining VIX, which is pointing to them serving as still some more cannon fodder in the bullish advance. In fairness though, it can't be denied that the average put/call ratio has been rising over the last three months.
Still, that doesn't change the reality that my reasonably and justifiably aggressive long positions in both S&P 500 and gold, are even more profitable. No problem that the Russell 2000 didn't climb as much – emerging markets stepped into the void on account of predictably cratering USD.
Friday didn't bring any changes to the narratives. The very weak non-farm payrolls weren't a selling catalyst in the least. All eyes remain on reopening trades, to the effect that value stocks are rising effortlessly whatever the nominal rates direction. In spite of inflation and inflation expectations not being negligible, we're in still in the reflationary period where economic growth is higher than either of these two.
Not only is the S&P 500 advance a very broad one, as evidenced by the number of stocks trading above their 50-day moving average (with tech playing a positive role once again), commodities continue to be fired on. Copper welcomed the uptick in inflation expectations. The Fed might be exploring market reactions if it had moved to counter inflation, at least to some degree. Don't hold your breath though,.
Gold is making its run, unhampered by nominal yields rising on the day. Miners have continued their advance, and the precious metals upleg offers a sight of health. Note also that the silver miners have been doing better overall than the gold miners throughout the long soft patch starting in August 2020. That's precisely what to expect in an environment of inflation running hot:
(…) Gold and silver fireworks arrived, and there is more is to come! What better proof than a broad-based advance across the sector, starting with both metals, and extending to gold and silver miners left and right. Not to mention the copper fires burning brightly. If you were listening to my incessant red metal bullish calls, you're very happy now. And just as in the precious metals, there is more to come here, too.
And as the Fed continues playing ostrich when it comes action, commodities, including oil, continue doing great. While black gold consolidated over the last few sessions, it remains primed to go higher.
Bitcoin is also enjoying upside momentum as it aims to clear the 50-day moving average vicinity. Its uptrend is gradually reasserting itself – patience required still. But it's the steep gains in other cryptos, like Ethereum making new highs practically on a daily basis, that is catching much attention. ETH/USD looks extended on the short-term, though. And I would prefer waiting for a pullback, especially given the last two candles (both having significant knots).
Let's move right into the charts (all courtesy of www.stockcharts.com).
Inflation Expectations
A rare sight indeed – Treasury yields have run behind inflation expectations on Friday.
Gold, Silver And Miners
Gold and miners continue running higher together. And copper had a great day.
Silver consolidated daily gains, lagging behind both gold and copper. The white metal has great days ahead still, and Friday's session proves that the precious metals upswing is nowhere near overheated.
Crude Oil
Crude oil bulls defended Thursday's lows, and the bullish consolidation continues. Look for an upside breakout next as this isn't a double top. I'm standing by my calls for at least $80 West Texas Intermediate before 2022 is over. Seasonality is still good for black gold, so enjoy the ride!
Summary
S&P 500 is at new highs, and its ascent is far from over . There is no signs of a major or even local top. The index will have an easier time now that the short-term tech-Nasdaq outlook has flipped bullish as well.
Gold, silver and miners continue to be well positioned to reap further gains as the well-balanced rally continues. Copper and nominal yields balance each other out, so the factors speak for a bullish consolidation in the short term as a minimum.
Crude oil is getting ready to resume its upswing in a modest fashion, and I look for its early March top to be challenged this or next week.
Bitcoin upswing is very gradually reasserting itself, and the bulls would be well advised to pay attention as the 50-day moving average, as it is likely to start sloping upwards perhaps as early as this Friday, thus supporting the prices above the late April base.