The tax hike proposal shock is over, and S&P 500 took again on the ATHs on Friday. Buying pressure throughout the day lasted almost till the closing bell, and is likely to continue this week as well. And why shouldn‘t it – has anything changed? The artificial selling any capital gains tax hike would generate, is likely to come before year end – not now:
(…) Look still though how little has changed, as if the tax raising plans haven‘t been around since the infrastructure bill or implicitly even before. It‘s still April, and markets are pricing in not only this select reality, but broader tax increases coming. Yes, they have woken up, and the reflation paradigm is getting an unwelcome companion. This hit won‘t bring down the bull, but will slow it down – and the implications for broader economy will only hasten the pronounced advent of the commodities supercycle (well underway since the corona deflationary crash last year).
A day like almost any other – S&P 500 about to take again on the ATHs until the capital gains tax hike proposal came, shaving off 50 points in stocks within an hour. The 4,415 support held though, both before and after the closing bell. Are we ready to shake off the cold water and resume running higher again? Depends on where you look – stocks have quite some recovering still to do, and it‘s the precious metals and commodities that are performing best today. Both as an index and sectoral collection, the S&P 500 sustained broad damage, concentrated in the tech heavyweights. The volatility spike has been partially repelled but option traders seem expecting another shoe to drop, which attests to us better dampening expectations of a fast return above 4,170.
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S&P 500 closed in the the red, vindicating my bearish sentiment going into Monday‘s session. And as I have tweeted during the day, the sellling doesn‘t appear to be over. Friday‘s:
(…) selling wave before the close looks to indicate hesitation ahead. Even though VIX is attacking the 16 level, and the put/call ratio ticked higher, the bulls are little disturbed thus far. While VIX rose yesterday, it finished only a little above 17 – the tide in stocks hasn‘t turned to fear even temporarily in the least, and the current consolidation would still be one to be bought.