The rally of the S&P 500 Santa continues and the risk markets rejoice. What a beautiful sight to see the broadening and confirmation of the bond market. Financials and industrials are lagging behind, but real estate, healthcare and technology are buzzing smoothly. As I told you yesterday about volatility:
(…) The VIX is calming down, now around 21 with more room for a decline – at least as far as the rest of 2021 is concerned.
We have the lower values and today it looks like the bulls are looking equally constructive on both paper and real assets. Yesterday’s dollar slump helped as did bonds. The Fed is not yet in doubt about inflation expectations, there is currently no more compression of the yield curve, so everything is calm on the central bank front. That’s a good thing, the Santa Claus rally can go on unhindered.
Precious metals are seeking an apparent adjustment for lower yields and the lower dollar, and energy, base metals and agrifoods continue to fuel the commodities recovery. The hesitation in cryptocurrencies today could indicate lower gains than it did yesterday when we were rewarded with an improvement in returns instead of a brief consolidation.
Merry Christmas if you are celebrating – and if not, happy holidays with your loved ones. Let the festive season and the message of the Prince of Peace permeate our hearts and inspire the best of humanity.
Let’s get to the charts in a moment.
Outlook for S&P 500 and Nasdaq
The S&P 500 rally continues and the 4,720s are approaching again. Market breadth is not the least bit abysmal, and the riskier end of the bond spectrum looks positive, although concerns have not gone away for longer periods of time. Classic Santa Claus rally.
HYG jumps further up – risk taking wins this week. A little more strength from LQD would be desirable, but not an obstacle to further price gains.
Gold, silver and miners
Indeed, the downtrend in gold was not to be taken seriously – solid gains in precious metals followed. I don’t expect a shaky ride as the metals continue to appreciate in value relatively slowly.
Crude oil extended gains, and even if oil stocks paused, black gold did not see any sign of a decline. What is important is that the $ 72 area has been broken – the bulls should be able to hold the ground that has been gained.
Copper continues to track the general commodity rally and is not yet above average. The long red metal consolidation continues and an attempt to break out at the early October levels appears to be a matter of weeks (not days).
Bitcoin and Ethereum
Bitcoin and Ethereum are still consolidating Tuesday’s gains – performance is neither disappointing nor outstanding. Neither crypto appear to be in the mood for a break below the December lows.
If not yesterday then we are likely to get a little consolidation of the steep S&P 500 and the past two days’ commodity gains (Copper says) today – the positive seasonality hasn’t had the final say. HYG’s stance has improved significantly, and that bodes well for short-term gains yet to come before we dive into market conditions that are becoming increasingly volatile towards the end of Q1 2022. For the time being, let’s keep celebrating – Merry Christmas again – and enjoy the relatively smooth ride.