Market Update – March 4/21
Markets continued their decline today after Federal Reserve Chairman Jerome Powell said that as the national economy begins to reopen, “we will see inflation move up through base effects. That could create some upward pressure on prices.” While the Fed is expecting some inflation, Powell said he does not expect to raise interest rates this year until employment and inflation are back to sustainable levels.
Nasdaq
Another big down day for the markets, with the techs again leading the way down. The Nasdaq dropped another 274 points or 2.11% today and is now trading down 164 points for the calendar year. After breaking below its 50-DMA yesterday (red wavy line), the Nasdaq has now breached its uptrend line (green diagonal line) dating back a year ago.
S&P 500
The S&P 500 lost another 51.25 points today or 1.34%. The S&P 500 broke below its 50-DMA today, which had acted as a strong support level when tested late January and late February (green arrows).
Insiders are selling
The chart below shows that insiders have clearly decided to sell shares.
Canadian equities
The TSX Index was down as well, but held up better as oil prices surged today.
Bonds
The bond vigilantes continue to challenge the Fed’s policy of low rates and dovish outlook. When investors perceive that inflation, or credit risk is rising, they demand higher yields to compensate for the added risk. The term refers to the ability of the bond market investors to serve as a restraint on the government’s ability to overspend and over-borrow. It will be interesting to see who wins this battle. Trend Letter subscribers have benefitted handsomely with a recommendation made in August, betting on yields rising. As we can see on the chart, that recommendation was very timely, hitting the turn within days. That trade recommendation is up 38% since August.
Gold
Gold had another rough day, down 15.15 for the day. The only optimism for gold right now is that it is now oversold technically based on RSI (bottom of chart) so we should see at least some consolidation soon, if not a bounce off these levels.
Bitcoin
Bitcoin continues to be volatile, falling below the $50,000 level today.
Oil
Oil surged to the highest level in nearly two years after closing at 62.83, up 2.55 or 4.15% after the OPEC+ alliance surprised traders with its decision to keep output unchanged, signaling a tighter crude market in the months ahead.
US dollar
The US dollar continues to gain momentum on equity weakness and capital flows, especially from Europe. With expected increased volatility in the equity markets this year, the US dollar could see a significant rally going into 2022.
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