Stock bulls went right for the all-time highs yesterday, clearing the 3,900 threshold in this correction – one that is in its very late innings. But the preceding upswing has been sharp, and not all the internals support such a swift recovery, which is why I am still looking for consolidation to strike at any moment.
We might be actually experiencing that now, as today's premarket session has sent S&P 500 Futures a few dozen points down. The big picture is one of a stock market getting used to rising rates, which are rising in reflection of the economic growth. But what about the snapback short-term rally in long-term Treasuries?
It's not materializing as the instrument went down again yesterday – unconvincingly bobbing above recent lows. The defensive sectors, such as consumer staples and utilities, reversed yesterday (at a time when technology rose), sending a warning that we're about to see higher rates again. It is probably not happening as fast as through February, but still. Let's bring up my recent perspective on high rates:
(…) the "high rates" we're experiencing currently, do not compare to the early 1980s, which underscores the fragility of the current monetary order. The Fed knows that, and it has been evident in the long preparatory period and baby steps in the prior rate raising and balance sheet shrinking cycle.
The market will see through this, and the central bank will be forced to move to bring long-term rates down through yield curve control or a twist program, which would break the dollar, drive emerging markets, and not exactly control inflation – real rates would drop like a stone in such a scenario, turning around gold profoundly.
But the market knows the Fed isn't getting ready to really do anything more than it does right now. Gold rebounded on Tuesday, and the rally took it above $1,730, but the daily reversal is concerning. As I wrote yesterday in the title, the gold bulls can't rest – but they are resting, and prices are back at the lower end of the $1,720 volume profile.
Assessing the damage in the early stages of today's session will clarify whether the rally's dynamics are still intact, or not – regardless of today's headwinds. Silver isn't exactly at its strongest today. And it's more likely that it won't be anything to write home about.
Let‘s recall my what I said yesterday, and pick what's relevant to the metals:
(…) While the Fed is prepping the markets for higher inflation readings, gold didn't react too bullishly to yesterday's mildly positive CPI data – just wait for PPI data which would reflect the surging commodity prices more adequately. At the moment, evaluating the strength and internals of precious metals rebound, is the way to go as we might very well have seen the gold bottom, with the timid $1,670 zone test being all the bears could muster. Time and my dutiful reporting will tell.
Commodities are likely to do well in this reflationary phase, and the same goes for its turn to inflation. With precious metals, much depends upon their discounting mechanism's timing – when would they start doubting the transitory inflation utterances.
Let‘s move right into the charts (all courtesy of www.stockcharts.com).
GOLD AND YIELDS
Gold Daily Chart. 
The gold upswing reversed intraday while long-term Treasuries (i
Shares 20+ Year Treasury Bond ETF (NASDAQ:TLT) ETF) hadn't really moved in their tight daily range. Erasing much of the overnight selling today, would be probably the most the bulls would be able to achieve today. But even that isn't the deciding factor to determine the fate of the recovery off the $1,670 area.
UPSWING IN THE BALANCE
Gold Daily Chart. 
Gold miners are still painting a positive picture. They are outperforming gold, while silver isn't spiking. The white metal is under even more pressure today than gold itself. So, the signs from miners and silver balance each other out to a degree.
Gold Daily Chart. 
The whole sectors keeps hanging in the balance after yesterday's session. Each day, or even hour, the bulls don't utilize to reverse today's setback is questioning the upswing continuation. Not much to add here as the daily momentum appears to be shifting to the bears again.
SUMMARY
The gold upswing stalled, and its fate is being decided. Having fallen through the volume profile defined support at $1,720, the bulls objective is to recapture this zone. It's a tall order.