Weekly Memorandum 2/22/2021
Stocks are down across the board to start the week, but have failed to break any meaningful level of support yet. This could change by today's close or even by later in the week, but so far, the correction has been benign in the sense that there's been more of a correction via time instead of price. We anticipate a higher-low to form, from which the bull market will resume. This will be outlined further in this weekend's Mercator Letter.
The big news again last week was cryptocurrencies, which surged to new all-time highs in the case of Bitcoin and Ethereum, while Litecoin rallied to multi-year highs. A Mercator Crypto report is set to be published this weekend as well, and the biggest key for subscribers over the past month has undoubtedly been, "Do you want to be right, or do you want to make money?"
Crude Oil and other commodities pulled back slightly last week as well. The dollar was down a bit, while T-Notes broke to new multi-month lows. At some point, rising rates in the T-Note market should lead to a relief bid in the dollar. The paradox here is that rising rates are the natural response by capital markets to mitigate a dollar decline. With inflation expectations at 8-year highs, the pressure is undoubtedly being felt in the bond market. If commodities continue to bid, which it looks like they may, inflation expectations should continue to rise.
Precious metals were down last week too, and silver held up better than gold again. This is usually a sign that we are late-cycle in the precious metal world, but doesn't mean that we won't see another push higher at some point soon.