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Weekly Memorandum 8/10/2020

The divergence between the major equity indices continues to be a concern. Another week has passed, and the Nasdaq continues to trade at all-time highs, while the Dow and S&P lag behind. The longer this divergence continues, the more it becomes a concern. Gold and silver both touched new highs last week too, with gold making a new all-time high, while silver only made a new multi-year high.

Bitcoin traded above 12,000 for the first time in over a year in the overnight session. We continue to see tremendous opportunities in the crypto sector. Ignore them at your own dismay. Our detailed crypto analysis is articulated on a monthly basis in the Mercator Crypto Report.

In other markets, T-Notes closed at their highest levels in history last Tuesday. Crude Oil continued its sideways price action and volatility compression last week. We anticipate a large price move in the energy market sooner rather than later, as periods of low volatility usually precede periods of high volatility.

The U.S. Dollar continued its decline last week as well, but it caught a relief bid towards the end of the week. The technical damage is fairly severe on the chart, but sentiment has shifted in such a way that an important bottom may have formed. This will be something we monitor closely, because our top-down macroeconomic analysis always begins with currency. We are always looking for opportunities in the global marketplace where a country's currency is rising in conjunction with its financial assets. Otherwise, returns are lost due to forex fluctuations.

As the U.S. elections approach, capital is aligning itself accordingly. We note that in July 2016, interest rates bottomed and subsequently rallied for about 2 years until October 2018. We are monitoring closely for a large reversal of the sort, because regimes in power affect international capital flows.

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