Oct 12, 2022
VOT Research Desk
Market Insights and Analysis
The buyers faked a breakout after the bears in the S&P 500 failed to maintain their momentum. This bears the hallmarks of a first refusal to rise, despite the fact that it was supported by bonds, which gave up both their intraday gains and their risk-on posture. The 3,620s would serve as the initial (and easiest to overcome) level of resistance, so we wouldn’t anticipate any significant upward movement today. This would be put to the test by the initial reaction to the PPI; stocks are likely to try to interpret it in a bullish way before realizing that the CPI of tomorrow really matters more to the Fed.
Despite the 0.4% m/m PPI and core and y/y PPI figures balancing out, stocks are giving in to the downside, making the possibility of a fake breakout later today increasingly unlikely
.
As a result, today is most likely to bring only a modest initial struggle for appreciation—one that would be overcome during the regular session. Long-dated Treasuries haven’t kept promising intraday gains, making their stabilization still suspect. This is a choppy day, so any upswing would be brief. The short end of the curve still reflects hawkish Fed expectations and rhetoric, but it is not in any way leading the BoE’s actions regarding the Fed.
Given the price action to date, We anticipate a sticky CPI and core CPI figure tomorrow. Any potential positive initial market reaction would be sold into. It is true that We are not seeking a CPI figure that is so low as to facilitate long-term gains; however, the sideways trading that is currently taking place favors the bears taking the initiative tomorrow. If we close above my 3,635 level with confirmation from outside markets (which is unlikely), I will definitely tweet about it
.
In terms of tomorrow, the reversals in precious metals and miners are gradually tipping the balance in the negative direction. Premarket today, silver and copper confirmed each other daily; this is not a bullish sign. Silver is not beginning a significant rally this week, despite the COMEX supplies status, but it is brewing. Keep in mind that mining for other base metals produces the white metal, and copper stocks aren’t particularly high either.
The recent shallow, flag-like correction on the daily chart is almost over, and oil stocks continue to maintain their distinct bullish posture. As a result, crude oil is likely to continue rising. Since Monday’s muddle-through prediction for Bitcoin and Ethereum over the next few sessions is still playing out, cryptocurrencies are basing, for the time being, unwilling to sharply move up.
Let’s return to the crucial last sentence of yesterday’s analysis:
The end of the parabolic rise in yields and calm in the bond markets is the key to any sustainable S&P 500 rally. However, there are too many moving parts to predict what kind of Q4 rally that would result in. Real assets would respond to any tightening pause with kindness in such an environment because they are the least vulnerable.
