[Chart courtesy of MarketWatch.com]

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…

[Chart courtesy of MarketWatch.com]

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.

[Chart courtesy of MarketWatch.com]

1. Moving the markets

The futures markets already indicated a strong opening, which is exactly how things played out. The major indexes roared out of the gate with all three of them displaying solid gains, but the leader was the Nasdaq by showing off with an advance of +1.55%.

Last week’s weakness was shoved in the rear-view mirror, when Fed VP Kaplan, after Friday’s close, uttered those words that markets are dying to hear, namely that “he’s open to adjusting his view that the Central Bank should start tapering sooner rather than later if the Delta variant persists and hurts economic progress.”

Wow, how much clearer can he be to announce that talk about tapering was just that: Empty talk.

Be that as it may, market reaction was broadly bullish with even the international arena recovering from its recent swoon and participating in today’s “Ramp-A-Thon.” The US Dollar took a swan dive, with bond yields joining in, as the 10-year dropped to 1.25%.

That caused Gold to take off with the precious metal not only rebounding +1.26% but also reclaiming its psychologically important $1,800 level.

The key event is the upcoming Jackson Hole, WY virtual symposium and Fed head Powell’s highly anticipated speech later this week causing a wave of speculations. Here’s one:

Our base case is that the FOMC will announce a taper in September if the August non-farm payrolls is strong,” said Joseph Capurso, head of international economics at CBA. “We anticipate the taper will be implemented in October or November, though the recent increase in Covid infections and deaths in parts of the U.S. may give Powell pause.

It seems something went awry in the markets today, as equities totally disconnected from the bond markets, as Bloomberg demonstrates in this chart leaving me pondering as to who will be right in the end.