Weekly Memorandum 9/21/2020
Equities are continue to behave in a risk-off manner, as all three major indices are down notably this morning to start off the week. We have warned readers recently that downside risks were rising. Last week's memo stated, "...if the September 2 high was meaningful, we could see a continued pullback for the next couple weeks. However, we still lean with the idea that this pullback will be more corrective in nature versus an actual reversal in trend." The September 2 high appears ever more significant now. It looks like equities need to shake out a few more of the weaker hands before we can find a decisive bottom.
In other markets, cryptocurrencies are down hard too this morning; especially Litecoin, which broke down to new cyclical lows. Precious metals are taking it on the chin as well, but due to their recent correlation with T-Notes, we could see a reversal in this space fairly soon.
One market that especially had our attention last week was the U.S. Dollar. It was stated, "One market that especially has our attention at the moment is the U.S. Dollar. After a multi-week decline, we could see a meaningful reversal here." The reserve currency declined last week, but it's looking promising this morning, as global capital seeks refuge in safety.
We also note that multiple agricultural commodities closed out at weekly highs last week, including corn, soybeans, and wheat. It will be interesting to see whether they can weather a short-term deflationary wave in the broader market. If so, it would bode very well for their longer-term prospects, as they recently cleared important levels of resistance.
Buckle up, friends. It looks like these next couple weeks could be fairly turbulent.