Fitting summary of S&P 500 rally – we‘ve seen one of the largest 2y yields daily declines on slowing wage inflation. ISM Services PMIs also added to the Fed hawkishness reappraisal. Squeezing the bears, credit markets were confirming with a risk-on turn likewise.

Daily market breadth was really good, and spells that the move isn‘t over in the least. It progressed fast on the double punch – NFPs not coming in too hot, and real economy slowdown. Where does that leave us? With more prospects for LEIs moving lower, real estate declines, earnings downgrades and ultimately unemployment increase.

All in the name of fighting inflation, after the transitory debacle I called Apr 2021 vocally. Now, the Fed is to keep tightening into a slowing economy (and ready to overdo it), and its targets of CPI below 5% in 2023 and at 2.5% in 2024, are too rosy.

Apart from the shape of the recession, and how well it would be cushioned by the U.S. consumer (look at confidence, expectations, retail sales, deliquencies etc), the key questions are just how far the Fed would take the Fed funds rate, and how long it wishes to keep it at its own evolving definition of a restrictive level.

We‘re in for a great year in precious metals, base metals, and neither agrifoods, nor energy (oil with its latest summer spike to $100 roughly) would disappoint. At least in the first half of the year, Treasuries are likely to do well – but otherwise 60/40 and passive investing are as dead as a dodo bird.

To get a feel for what premium subscribers get all too regularly, I‘m opening today‘s chart sections to everyone (except the position details that remain premium).

Keep enjoying the lively Twitter feed serving you all already in, which comes on top of getting the key daily analytics right into your mailbox. Plenty gets addressed there (or on Telegram if you prefer), but the analyses (whether short or long format, depending on market action) over email are the bedrock.

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

S&P 500 and Nasdaq Outlook

Let‘s go and keep defending the lower border of 3,895 – 3,910 zone. 3,875 would be the following logical support. Next stop once stocks repel the profit takers, is 3,955. Keep in mind that SPX is running on a Fed tightening misperception – the central bank isn‘t backing off, and recession isn‘t bullish.

Credit Markets

Bonds are doing fine, and the retreat is amply translated to the USD downswing. That was enough for a broad stock market rally support.

Gold, Silver and Miners

Silver was a little in gold‘s shadow Friday, relatively speaking – but the white metal will catch more fire as it builds energy for a fresh upleg. Note how well miners confirm, and keep confirming.

Crude Oil

Crude oil‘s time will come later this year, close to summer – for now, this is a laggard of 2023 that makes sense to be in only as part of a real assets portfolio (no change since my late autumn words). Oil stocks can be counted on, though.

Copper

Copper is a bright spot, showing the way for commodities in 2023 – more appreciation to come across the board. You remember how bullishly I had been covering nickel, cobalt and lithium (EV essential metals) too.

Bitcoin and Ethereum

No more reasoning required as to why I‘m not talking Bitcoin and Ethereum...

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Monica Kingsley

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mk@monicakingsley.co

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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.

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