Note: There will be no video tonight, as I’m currently out of the office. I appreciate your understanding.
Minor consolidation got underway today with 8 of 11 sectors falling, and some of the Defensive sectors proving unusually hard hit. Following five straight days of gains, it’s normal to see some backing and filling, but I suspect that the first part of December should prove quite choppy into FOMC and even after, which might persist into mid-December before a strong lift back to highs into year-end. For now, the near-term support lies at 6750-60 while resistance lies at 6920, and I’m not sure 6920 will be taken out over the next couple of weeks. Near-term weakness into Tuesday likely could prove buyable for a push to test October peaks, but the broader tape still requires a bit more broadening out before expecting an immediate push back to new highs. Additionally, the correlation with Treasuries has started to increase again, so a near-term lift in ^TNX into FOMC very well could still result in Equities proving “choppy”. Overall, I have a constructive view for December, but still believe it is likely to show a “back and forth” type pattern over the next couple of weeks before turning higher to new highs.
S&P 500 Index
The last few days have seen a surge in Silver back to new all-time highs, and it is proving resilient and much stronger than Gold. While a more hawkish BOJ could prove positive for Gold as both Gold and Japanese Yen have enjoyed some traditional positive correlation, it’s Silver’s strength that likely could show even greater strength now, particularly when US Interest rates and US Dollar begin to turn back lower this month. I had been expecting Silver to decline into early December after its big rally into October and subsequent 20% decline. However, this recent lift gives a more optimistic stance for now. However, following the last few days, Silver has gotten stretched and isn’t as good of a near-term risk/reward until this can consolidate gains a bit. My thinking is $61 could be reached, but I would look to buy pullbacks to the mid-to-high $50’s when this occurs before the start of even more gains in December. The larger correction for the precious metals might be postponed until January/February of next year, when long-term interest rates start to creep higher. For now, given this strength in the Metals, it does look prudent to have some Metals exposure, as both gold and specifically shown here- Silver, have proven quite resilient.
Silver Futures
As mentioned, ^TNX turned sharply higher following the hawkish message from BOJ today and yields likely push higher up to 4.20% However, as seen in this chart of US 10-year Treasury Index, the larger downtrend remains intact and i suspect that near-term gains in ^TNX yields (Treasury note declines) won’t persist past 12/10 FOMC meeting before a rate cut results in Yields turning back down to the lows. For now, Treasury longs should hold off on buying dips right away, as this Yield push-up likely persists another week. However, both US Treasury yields and the US Dollar should be starting a larger decline back to new monthly lows post FOMC meeting this month. Here’s the daily ^TNX chart below showing a brief spike in ^TNX.
US Government Bonds 10 YR Yield
Big move today was less about Equities (though decline in Cryptocurrencies managed to drag down Stocks today) but more about BOJ’s more hawkish tilt, as BOJ Governor Ueda’s thoughts that if “rates are raised, it’s still accommodative” might mean that he is on board with a December hike. The BOJ was the biggest gainer among the “majors” today, and expectations are now at 80% for a hike this month, while FOMC’s likelihood has now risen to 100%. However, the Yen’s rally for now might prove subdued as there is more than two weeks to go, while the FOMC rate cut is mostly priced in already. My technicals say that a push up to test January peaks in USDJPY looks probable before a BOJ hike leads the Yen rally in December into January. This is important for the US, given its influence on the US Dollar and US Treasury yields, the latter of which took a big leg higher today (while DXY strengthened intra-day from 99 to 99.41), and this could persist into next week, a bit more into FOMC, before turning back lower in the back half of December. I see USDJPY going to 158.85-159.25 before turning lower and beginning a decline down to 148. (meaning Yen rally) However, in the bigger scheme of things, the Yen should move much lower in 2026, so gains to 148 vs. the US Dollar should prove brief into early next year before USDJPY starts another leg higher.
U.S. Dollar / Japanese Yen
