1. Moving the markets

The major indexes managed to close the notoriously slow month of August on a whimper, but unscathed and with bullish momentum intact. It was a day of churning with the S&P 500 touching a new intraday high but then fading below its unchanged line.

For the month, all three of them came out ahead, led by the Nasdaq with a 4% gain, while the S&P 500 and Dow ended up with advances of 3% and 1.3% respectively.

Earnings growth contributed to the bullish meme, assisted by continued loose Fed monetary policies, which were the main contributor to the S&P 500 scoring its 9^th positive month in the last 10. The index also achieved its 53^rd record close of 2021 just yesterday.

All this occurred in the face of oncoming headwinds in form of the Delta variant of Covid 19, which at times managed to cast doubt on the economic recovery. However, in the end, the Fed and its lack of serious taper talk and definitive action, as well as soothing words about the “transitory” effect of inflation, won out and kept the upward trend alive.

Today, we learned that consumer confidence crashed with inflation fears hitting a 3-year high, as ZH reported. The US Dollar trod water, while the 10-year yield inched up a couple of basis points to 1.305%. This flight to nowhere allowed gold to add +0.28% thereby solidifying it position above the $1,800 level.

1. Moving the markets

Right now, it seems there is no stopping the bullish train with the S&P 500 taking out its 4,500 milestone for the first time, while the other two major indexes continued their winning streak as well.

Bond yields rocketed higher with the 10-year climbing to 1.35%, which was the highest level since earlier in the month when it reached 1.36%. This move helped the financial sector with XLF sprinting ahead by +1.18%.

Assisting the ascent was the ongoing short-squeeze, which followed through from last week and has now bounced 10% off its bottom, which was helped by a massive bank buy back scheme. Also boosting sentiment were signs that the delta variant cases could be peaking.

The US Dollar ripped and dipped and essentially ended unchanged, thereby allowing gold to recapture some of its early losses, but the precious metal still lost its $1,800 level again by dropping -0.88%.

As ZeroHedge pointed out, the month of August has historically been one of the quietest periods for trading, but the S&P’s average volume this year is still below its 10-year average and looks to be the lowest since 2018. It now has been 10 months since the S&P suffered a 5% drawdown or greater. Hmmm…

1. Moving the markets

After yesterday’s ramp, you could have expected some sort of pullback in the markets, but the rally continued unabated with some sell off into close, however, green numbers prevailed. Leading the charge was the Nasdaq with a gain of +0.52%.

Helping the major indexes to maintain upward momentum was news that US regulators granted full approval for the Pfizer vaccine, causing traders to presume that the latest Covid flare up has peaked.

Overall, it was a fairly quiet day with the focus being on the upcoming Jackson Hole symposium later this week. Again, the open-ended question is whether the bankers will disclose more details about their intended plans to taper stimulus—or not.

The summit will be on a virtual basis and held on Thursday with Fed head Powell giving a speech on Friday. Opined one analyst: “It will probably be a slow taper with no commitments over interest hikes.”

Business Sentiment soured, confirming the recent trend of “soft” survey data dumping back to the reality of “hard” data, as Zero Hedge saw it, with Bloomberg graphing the trend here.

The short squeeze of the past few days persisted with the index now having bounced off the bottom by some 9%. The 10-year bond yield headed north hitting overhead resistance, while the US Dollar accelerated its southerly path of the past two days.   

The leap in yields neutralized gold, which bounced around its unchanged line and ended the session down a tad, but its chart pattern indicates that a breakout, either up or down, will be a distinct possibility in the near future.