Financial Markets
This week the S&P500 and the NASDAQ 100 re-tested support, losing 1.5% and 2.4%, respectively. The small cap index (Russel 2000) was down by 2.3%. Trading volumes were average during the week but declined on Friday.
Precious metals remain strong. Gold continues making new all-time-highs - now at 3084$/oz. Silver gained 3.3% and is going to re-test the 34-35$ level again.
WTI is still close to support and went up by 1.1% to ~69$/bbl. If it continues falling, the next support levels are at 64 and 62$.
Bitcoin fell 4.3%, contradicting the previous week's move. It is essentially trading sideways, like the equity market. The key resistance and support levels on Bitcoin, for the short term, are 92k$ and 72-74k$, respectively.
The relative strength of the US dollar (DXY) was essentially unchanged and is still at 104. The EUR/USD is around 1.082$, the GBP/USD is at 1.294$, and the USD/JPY is at 149.82 JPY.
US M2 money supply at the date of 24th February 2025 was up by 0.5%, showing a slow increase after being unchanged in January. If the money supply was going down, it would be a warning sign for the economy and equities.
The national financial conditions index (NFCI) for the week of 17th March 2025 tightened by 1.2%, a bearish sign which coincided with the equity market action on previous weeks. Note that this indicator is delayed by a week.
US bond yields were essentially unchanged for the week, and now sit at 3.912% for the 2-year and 4.251% for the 10-year. These are below the current FED funds rate, showing that investor expectations favor a decrease in interest rates and lower inflation.
The VIX rose to 21.6, a healthy level that shows investors are becoming a bit more fearful and are trying to protect themselves from a bigger market correction. Option sellers need to be strategic and try to sell their put options when the premiums are the highest and the risk of assignment the lowest (typically after a price fall, close to a support level). Currently, risk premium is reasonable. But don't go crazy selling puts because you might be trying to catch a falling knife!
Comment Section
The US equity markets seem to be holding around current levels, but we don't know for how long.
We have been accumulating some bearish signs that we enumerate in this paragraph without developing too much to keep it short (do your own research on these topics). After the 25% tariffs on the automotive sector imports, auto stocks sell off... A few days ago, FEDEX warned about soft demand on their earnings call... NIKE sales were disappointing... ACCENTURE complained about losing government contracts, which will take a toll on their revenue...And so on...
Fundamentally, the US stock market is still expensive as a whole, which together with weak economic data could warrant further corrections over the coming months. Other possibility is a sideways market that doesn't enter into panic mode and keeps holding while a recession is not evident.
In the meanwhile, the Swiss national bank cut rates to 0.25%! We can only expect that central banks lower interest rates in lockstep, all around the world, to try to avoid a global recession. But will it work?
This is not a time for adventures. When asset prices become truly cheap, buy them - you need to be patient. But to buy cheap and truly take advantage of opportunities, you will need some cash! You get the idea!
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