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Week in Review: 24-28 February 2025

Financial Markets

The US equity market sold off during most of the week, recovering partially on Friday. This week the S&P500 and the NASDAQ 100 lost 1% and 3.4%, respectively. The small cap index (Russel 2000) was down only 1.5%. Trading volumes were considerably above average, indicating that sentiment might be changing to bearish.

The metals were weaker this week. Gold and silver lost 2.7% and 4%, respectively. In times of fear, cash is king, and precious metals are not immune to a selloff in the short term. Gold didn't reach the 3k$ level, and may not get there before a pullback and/or consolidation around current levels.

WTI was unchanged and is at 69.9$/bbl. The next support level is 67$.

Bitcoin fell a whopping 11.7%, and has the next support level around 74k$.

The relative strength of the US dollar (DXY) increased to 107.6. The EUR/USD is around 1.037$, the GBP/USD is at 1.257$, and the USD/JPY is at 150.61 JPY.

US M2 money supply at the date of 27th January 2024 was flat, which could be a bearish sign, together with the recent selloffs.

The national financial conditions index (NFCI) for the week of 17th February 2025 tightened by 2.3%, another bearish sign! Note that this indicator is delayed by a week.

US bond yields were down significantly this week, and now sit at 3.987% for the 2-year and 4.203% 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 ~22 during the week, but on Friday the markets were green and the VIX closed at 19.6. Now, premiums and fear in the market are reaching a healthier level and are not subdued.


Comment Section

Looking at an unweighted index such as the VALUG, we clearly see that the north American stock market as a whole has been threading water since 2024. The advances in the technology space pushed the NASDAQ and S&P500 higher, but the rally has been very concentrated. When growth expectations moderate, we can expect tech stock valuations to come down to earth. However, such a correction could propagate through the whole market. Could this aggravate consumer confidence and precipitate a recession?
 
NVIDIA trading has been marked by increasing volatility and lower trading volumes lately. Is it the beginning of the correction and a bear market in tech stocks? TESLA and SMCI have already corrected! Bitcoin is getting weaker. Fear is in the air. The crypto space will be a bloodbath!
 

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