Has Inflation Hit A Tipping Point?

The S&P 500 hasn't extended Monday's gains, as it continues to trade in a cautious, tight range. NASDAQ Composite didn't reverse, and I'm looking for it to reassert its strength despite having approached the rising resistance line connecting the February and April highs.

Sure, a little rotation later today wouldn't be unimaginable, as I am looking for the Fed to largely avoid bringing up the topic of taper, which would mean continuing its ostrich pose when faced with rising inflation.

The dollar will get frightened, but the 2021 lows have held in May, and are holding up in June. Unless they break (I‘m not looking for that to happen this month), the greenback is likely range-bound for now.

Gold has suffered through the taper fears, and silver remains the stronger metal. Obviously, as I am not looking for the inflation trades to roll over. Quite to the contrary, I expect them to grow in strength. Gold will welcome the Fed‘s inaction, leading to a break of the $1,900 mark. It probably will not happen today, but tomorrow's action should be pretty bullish. You know what they say about the first moves on key event days, being the false ones.

Anyway, inflation expectations seem to be getting it right again, as it is rising back above the April lows. The copper-to-10-year yield ratio has been beaten down badly, and both fundamentals and technicals are arrayed behind the red metal, which would positively reflect upon silver, too. And miners are likely to get their act together alongside gold.

Crude oil remains the reliable commodity star, refusing to yield much ground at all. And since the oil index confirms the strength it showed yesterday, buying the dips in expectation of more gains, is the way to go.

Bitcoin closed for a second day above the declining resistance line connecting May and Jun rebound highs, peeking above 41,000. Its current move to 39,000 represents an opportunity to join in on the long side, as both the daily and weekly charts look increasingly bullish. Ethereum is lagging a little at the moment, but the base ushering return of its outperformance, is getting long in the tooth.

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

Miners are more resilient in their decline than gold, which increases the odds of a sharp turnaround in the yellow metal next.

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Silver has been and is likely to outperform gold, and the washout in the copper-to-10-year yield ratio highlights the excessive nature of both moves. I'm looking for copper to rebound, which would have greater effect on silver than gold.

h2 Crude Oil/h2

Crude oil offers one long, drawn-out upswing with a few shallow interruptions. It seems that only a serious short-term blow to the bullish commodities trade, reopenings and economic activity rising environment, would make black gold decline somewhat.

h2 Summary/h2

The S&P 500 remains well positioned to shake off the inflation worries over the Fed doing nothing. Inflation isn't yet strong enough to dent P&Ls, and brighter days for both the 500-strong index and Nasdaq, are ahead.

Gold is likely to recover strongly today, but would be outperformed by silver. Miners won't stand aside as the yellow metal takes on $1,900 again.

The breather in crude oil is looking once again to be deferred. Pullbacks are to be bought (the oil index confirms), and the oil outlook remains bullish.

Bitcoin and Ethereum are in accumulation mode, and the bears look to have run out of time. Look for today's downswing to be decisively invalidated over the coming week.

Written By: Monica Kingsley