Weekly Memorandum 6/29/2020
Equities are basically flat to start off this week in the pre-market. This past weekend, a new Mercator Letter was published, in which we outlined our short-term bearish case for equities. We are looking towards the next low to determine the strength of this short-term uptrend we've witnessed from the corona-crash lows in March.
Our eyes are also on the Treasury market, as spreads between investment-grade corporate debt and U.S. Treasuries are back to near their pre-crash levels. This is a major reason why we think the imminent weakness in equities will likely be more corrective in nature versus the end of an uptrend. We are looking for new all-time highs across all Treasuries, and still anticipate the 10-year yield reaching, or coming very close to, 0%.
Crude Oil is up slightly in pre-market as well, although it appears that the short-term favors the downside from a risk-reward perspective. We are noting deflationary pressures resurfacing in the market, so we could anticipate the U.S. Dollar to see a nice bid here.
Cryptocurrencies are showing some weakness, but this will be explained more in tomorrow's publication of the Mercator Crypto Report. We are also watching the precious metals space very closely, as the correlation between precious metals and treasury prices was noted duly earlier this year.
It looks like we are in for a couple weeks of choppiness in the markets. Buckle up!