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Weekly Memorandum 2/14/2022

Stocks ended last week near the lows, which is typically construed as bearish price action. Following another mid-week reversal, we saw a lower-high form, which in theory, serves to reinforce the short-term downtrend. Equities remain in a neutral zone between key resistance and key support, and until we see a resolution from this range, the market choppiness is likely to persist.

T-Notes fell to a new multi-year low last week, but formed a low on Thursday and finished well on Friday. Even so, CPI reports last week showed how inflation was recorded at its highest level since 1982. Crude Oil spiked to its highest weekly close since September 2014 last week as well. So long as this commodity continues to rally, inflationary pressures are likely to persist.

Precious metals finished last week on a very bullish note too. With the Fed poised to act on short-term rates, we could finally see "real rates" (nominal rates less inflation rate) start to climb out of negative territory. This would be bullish for metals in theory.

Cryptocurrencies also formed a lower-high last week, reinforcing the short-term downtrend. The Euro formed a lower-high too, as the U.S. Dollar index formed a higher-low. Grain markets were strong too but saw volatility spike near the end of the week.

The February edition of the Mercator Letter will be published next weekend (2/20). For daily market updates, we encourage readers to check out the Mercator Tactical Market Trader report, which comes with subscriptions to the Mercator Letter and Mercator Crypto reports too.

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