S&P 500: More Profits Ahead
Monica Kingsley | Feb 09, 2022 12:51PM ET
S&P 500 bulls took the opportunity yesterday amid mild credit market support. Looks like more fireworks are to come – the risk-on turn is merely starting. Not only financials, but tech welcomed higher yields. It seems that the positive seasonality of second to third week of February is working. We have quite a way to go still on the upside – 4,600 is waiting. And it remains to be seen how far in the 4,600-4,700 range stocks make it.
Consumer discretionaries are outperforming staples, and energy isn't cratering. The brief commodities reprieve supports the stock market advance. Precious metals are rising strongly – both thanks to inflation expectations not budging much, and the expected copper upturn. Not even cryptos are plunging. The open S&P 500 and oil profits can keep on rising.
Looks like the markets are slowly positioning for yet another hot inflation number tomorrow. How many times lately have there been expectations that high CPI data would sink stocks – but these rallied instead? Thursday is likely to turn out similarly. I‘m not looking for the stock market rally to top out tomorrow. The March FOMC is still quite a few weeks away, 50bp rate hike fears notwithstanding.
Let‘s move right into the charts (all courtesy of www.stockcharts.com ).
h2 S&P 500 and Nasdaq Outlook/h2S&P 500 bulls have made the opening step, and look ready to extend gains. Even volume has returned a little, but importantly, sellers were nowhere to be seen. That will likely be the case today as well.
h2 Credit Markets/h2iShares iBoxx $ High Yield Corporate Bond ETF (NYSE:HYG) couldn't keep the opening gains, but junk bonds still did better than their quality counterparts. The HYG weakness looks likely to be reversed (to some degree) today.
h2 Gold, Silver and Miners/h2
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Precious metals are firmly on another upleg. And miners strength is confirming that. When inflation turns out to be more stubborn than generally appreciated, and bond yields don't catch up nearly enough, precious metals like that. Love that.
h2 Crude Oil/h2Crude oil bulls paused. But the dip isn't likely to reach too far. I still wouldn't count on a pullback towards $88 or lower really. This correction is more likely to be in time than in price.
h2 Copper/h2Copper is clearly refusing to decline. Its upswing looks to be a question of shortening time only. Likewise, the commodities reprieve will be reversed shortly. The red metal‘s price action coupled with precious metal moves, is very nice to see.
h2 Bitcoin and Ethereum/h2Cryptos aren't weakening. They look to be pausing in the upswing only. How long would they need to consolidate before continuing the attempt to go higher?
h2 Summary/h2S&P 500 bulls have a firm grip on higher prices. We're looking at another green day today. And if it's accompanied by the turning bonds, then all the better. Tech has risen, oil is down a little, while sectoral breadth improves. The conditions are in place for the S&P 500 to overcome 4,600. The risk-on rally hasn't run out of time, and the March FOMC is still far away. Upgraded rate hike prospects are being increasingly absorbed by the markets, and stocks don't look spooked at the moment. The bears' time will come, though. But let's first enjoy the gains our timely positioning is bringing.
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