As pressure on the Fed to act grows

CPI banished the specter of rising inflation to the markets, coming in not too hot, not too cold. Still, the signs pointing to broadening the base of price increases are hard to miss, which today‘s PPI would likely and did illustrate. The other key headline event was the Dallas Fed calling for taper announcement in September, and its actual start in October – and given how the overnight rally in commodities fizzled out, the decision to tighten many open trades‘ parameters earlier today, was a good one in lightening overall risk.

Again, today’s report will be shorter than usual, and focus on select charts so as to drive position details of all the five publications.

Let‘s move right into the charts.

S&P 500 and Nasdaq outlook

The infrastructure bill achieved only so much in driving value and risk appetite within S&P 500 yesterday – the Monday announced upcoming divergence of the two leading indices clearly shows in the Nasdaq underperformance driven by tech behemoths yesterday.

Credit markets

Credit markets made a modest turn, but the white candle‘s credibility is taken down a notch by the weak volume. It isn‘t fully balanced by the relative strength in LQD vs. TLT – Treasury yields are indeed about to start widening again as I‘ve written yesterday and before. We‘re still in an economic expansion that got a fresh boost, and financials to utilities are likely to keep doing well.

Gold, silver and miners

Nice rebound in gold, but coupled with poor miners performance, it remains suspect. Look for any hawkish Fed utterances to hit here in the metals harder than in commodities. Funny, taper is hawkish in today‘s environment, I know, but still. The dust hasn‘t yet settled in spite of repeated inflation expectations upticks and strong TIPS performance. The market is obviously giving the Fed the benefit of the (inflation fighter) doubt, which though looks like a losing proposition medium-term.

Crude oil

Oil has staged another intraday rebound, and in spite of the oil sector resilience, isn‘t out of the woods just yet. While the daily indicators are improving, I would like to see a bit more price resilience first.

Copper

Copper has likewise turned higher, trailing behind the sharply recovering commodity index. More back and forth movement is to be expected at least today, which mirrors the prior oil very short-term outlook.

Bitcoin and Ethereum

The slow motion crypto upswing has paused, and I would prefer to see signs of the bullish strength returning first.

Summary

In place of summary today, please see the above chart descriptions for my take.