Feeling the heat of slowing economy

S&P 500 got ahead of itself early in the session, and corrected somewhat. Credit markets though didn‘t paint a picture of caution – it‘s risk on there. VIX didn‘t make much progress rising or falling, but today‘s NFPs day would bring a more eventful trajectory. I‘m not looking for any meaningful derailment of the reflation trades – yesterday‘s outperformance of value vs. tech, was encouraging just as much as CRB getting back within spitting distance of prior highs.

The market sentiment appears to be up, and yesterday‘s moves telegraph no disappointment expected, just as I tweeted prior to the data release. The real economy recovery still has reasonable traction, and while slowing down, the financial stress is abating – and the steady return of risk appetite in smallcaps, emerging markets, oil or copper, highlight that just as much as the dollar getting under pressure again.

But the figure came at 235k vs. 720k expectated – that‘s a serious undershoot. Off the bat, gold and silver would benefit tremendously, while the dollar not so much. Let‘s see how well the corresponding rise in Treasury yields would help to underpin the world reserve currency and value stocks…

In short, forget about tapering into a weakening economy that doesn‘t see labor participation or hours worked rising. The Fed won‘t take that gamble soon, and we know what that means for real assets (and stocks too as inflation and yields aren‘t yet breaking the bull) – fresh money finding its way into financial markets, lifting prices. Time to reap the rewards as I did overnight in the oil arena, or keep doing in both Bitcoin and Ethereum.

Let‘s move right into the charts.

S&P 500 and Nasdaq outlook

Yesterday brought higher prices and tight range in S&P 500 while Nasdaq declined on the risk-on moves returning to the stock and bond markets.

Credit markets

Credit markets strongly turned up. And the HYG-LQD-TLT dynamics is conducive to further gains in value stocks especially. Simply put, the quality instruments upturn has been encouraging.

Gold, silver and miners

Precious metals are approaching decision time, and I‘ve been for many days looking for an upside surprise – the bulls are likely to attend to it really soon.

Crude oil

Crude oil bulls took the opportunity, and ran with it – the oil sector reasonably confirms the upswing.

Copper

CRB Index continues its strong recovery, and copper won‘t remain below the 50-day moving average for too long – look for the red metal to shake off the August blues.

Bitcoin and Ethereum

Cryptos are springing higher again, and Bitcoin is joining in while I look for Ethereum to lead.

Summary

Even though NFPs disappointed, risk-on trades should welcome the Fed‘s inability to taper, which would help Treasury yields rise. Precious metals, cryptos and real assets will likely be today‘s clear winners while stocks consolidate. As I wrote yesterday, no fresh Fed speculations were invited by today‘s data.