Stock market remains stable as it digests its early-August rally, commodity prices rally and bitcoin price jumps.
This content has been produced by Kvarn Investment Services Ltd, a licensed investment firm supervised by the Finnish Financial Supervisory Authority. The content is intended for informational purposes only and should not be interpreted as investment advice or recommendation. All investing involves risks, and past performance is not a guarantee of future returns.
Last week, Kvarn Pulse newsletter was written on a rather positive note. The S&P 500 index had made a sharp jump upward at the turn of July and August, and the uptrend looked ready to continue. We also highlighted the strengthening of the price of gold, which had been in a downtrend over the preceding months.
At the index level, the stock market outlook has remained bullish.
Following the sharp upward move seen in early August, the S&P 500 index has moved in a fairly tight sideways range. The index is above its 20-, 50-, and 200-day moving averages, and these moving averages are aligned in the order required for an uptrend.
Within the stock market, however, we are drawing attention to the continued weakness of technology stocks.
Last week, we highlighted the QQQ/SPY ratio, which illustrates the relationship between the Nasdaq 100 and S&P 500 indices. We suggested that this ratio might be one of the best indicators for the stock market's next major move.
Over the past week, this ratio has fallen below its 10-day moving average. In our view, this gives some reason for caution. We will not draw strong conclusions until the ratio finds its way out from between its moving averages in one direction or the other. We note, however, that we have not yet seen this indicator give an unreserved "risk-on" signal.
The RPG/RPV ratio, which tracks the relationship between growth and value companies, tells a somewhat similar story. This ratio is now only barely above its 200-day moving average, and if it falls below this average as well, it would point even more strongly to investors shifting toward a cautious stance.
Market breadth currently offers room for various interpretations. Breadth itself is still at a healthy level, and a clear majority of S&P 500 constituent stocks remain in an uptrend. In just the past few days, however, we have begun to see this proportion decline and drop below its 20- and 50-day moving averages. While this phenomenon is not yet truly concerning, it is worth monitoring more closely in the coming weeks.
To gauge the overall market regime, it can sometimes be useful for an investor to examine stock indices not just in dollar terms, but also relative to the prices of major commodities.
From the chart below, we can see that in recent weeks, the ratios of the S&P 500 index against both oil (SPY/BRENT) and gold (SPY/GLD) have fallen below their 50-day moving averages. Commodity prices outperforming the S&P 500 index does not paint a picture of an unreservedly "risk-on" environment.
It is worth emphasizing, however, that we do not see any immediate risk of a correction in the stock market. The VIX index is currently at very low readings, and until it rises clearly above its 200-hour moving average, we consider the risk of a correction to be low.
The price of gold has continued its strong upward trend. Currently, the price of gold is around $4,500, sitting right near its 200-day moving average. If the price manages to stay above the 200-day moving average, gold's price action will begin to look like an unequivocal uptrend.
This is a remarkable shift, considering that as recently as July, the price of gold was in a clear downtrend. Every investor should be aware of such a rapid and powerful reversal in gold's price trajectory, as it increases the probability that reversals could be seen in the performance of other asset classes as well.
In addition to the price of gold itself, the share prices of gold-producing mining companies are also rallying strongly. From the chart below, we can see that the ratio between the mining company ETF (GDX) and the gold ETF (GLD) has risen almost vertically in August and is now very close to its early-year record highs.
Such a rapid relative strengthening of mining companies could suggest that their immediate upside potential might be limited. However, mining companies outperforming gold is in itself a highly positive signal, and as long as it continues, our primary expectation for gold's price action remains clearly positive.
The price of the other precious metal, silver, has also been rising. So far, however, its performance has not been quite as strong as gold's. Unlike gold, the price of silver is still below both its 200-day moving average and its June local top.
Silver's slightly weaker performance relative to gold would support the interpretation that while the market environment supports precious metal price action, investors are somewhat cautious and not unreservedly in a "risk-on" mood. We will continue to monitor the relative performance of gold and silver, however, as we believe a shift to a risk-on mood is possible, and if it materializes, it could very well show up as relative strength in silver.
It has been an interesting week in the crypto markets. Yesterday's news regarding U.S. Treasury bond buybacks caused a sharp upward bounce in the price of Bitcoin, alongside gold. This pushed Bitcoin's price above its 200-day moving average for the first time since November 2025.
We view this as a highly interesting development, forcing us to take seriously the possibility that a more permanent upward reversal for the long-subdued crypto market could be at hand.
What would we like to see next?
A sudden, news-driven spike to the 200-day average is certainly a promising start. The next important question is whether, following this impulsive move, enough new buyers can be found around the $70,000 mark to push the price further upward. This is the most important question for the coming week.
When assessing Bitcoin's relative strength, we note that the IBIT/SPY ratio—which tracks Bitcoin against the S&P 500 index—stalled on Wednesday at precisely the same level where its previous rallies faded during the summer months.
It will be highly interesting to see if the IBIT/SPY ratio continues to rise over the coming week. If it does, it would significantly increase our confidence in a new Bitcoin uptrend.
Among individual altcoins, one of the most interesting is undoubtedly the decentralized crypto exchange Hyperliquid's HYPE token. HYPE's price just received significant boost following news that U.S. President Donald Trump indicated U.S. regulators would seek to enable Hyperliquid's operations in the U.S. market.
This news-driven move brought HYPE's price right up to its July resistance level. As with Bitcoin, the crucial question for HYPE is whether enough new buyers can be found after a sudden spike to push the price further upward. A more cautious investor might also find it justified to wait and see if the momentum is sufficient to lift HYPE's price above its previous record highs.
In our analysis of the stock market, we noted that the S&P 500 index currently appears to be in a downtrend relative to both oil and gold prices.
This in itself does not mean that an investor shouldn't be allocated in the stock market. We have not yet seen any convincing signs that the stock market's uptrend was breaking.
We do, however, find it appropriate to evaluate whether at least some allocation to commodities is justified in one's portfolio. From the chart below, we can see that during August, the prices of gold, oil, and agricultural commodities have all turned into clear uptrends.
If one does not wish to seek exposure to various commodities through individual instruments, ETFs covering the entire asset class offer an easy alternative for many investors. A good example of such a fund is the WisdomTree Broad Commodities UCITS ETF (PCOM). From the chart below, we can see that the price of this ETF also turned into a clear uptrend in early August, and the price is approaching the record highs seen in May.
We are experiencing an interesting moment in the financial markets. The stock market is digesting its strong early-August rally, commodity prices have turned upward, and highly interesting signals have been seen in the crypto market. The investor's autumn seems to be kicking off from a very intriguing setup, where opportunities should be sought with an open mind, even outside the strongest themes of the preceding months.
Wherever the market goes, we will keep you up to date through the Kvarn Pulse newsletter, so stay tuned!
The information and sources presented are for illustrative purposes only. While obtained from sources deemed reliable, their accuracy cannot be guaranteed.
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