China Yuan Hands U.S. an Embarrassing, Dangerous & Under-Reported Breakout

May 31, 2021

Weekly Market Outlook

By Keith Schneider


blankThe Chinese Yuan hit a multi-year high last week vs. the US dollar, which means the dollar slid to a multi-year low.

Remarkably and embarrassingly, this was hardly noticed or mentioned on mainstream media.

Considering that the US national debt is over $27 trillion, which is the highest debt levels verses its GDP ever, and the Chinese are the second largest foreign holder (behind Japan)…

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This is something worth watching.  At some point we will have to pay it back.

Our ability to pay it back is directly related to the dollar’s ability to remain a reserve currency.

Rising debt levels and declining currency value is not the way to maintain our status as the worlds reserve currency.

With that in mind, let us move on to some mostly short-term positives.

This week’s highlights are the following:

  • The dollar lost ground against the Chinese Yuan, hitting lowest in over a decade.
  • Risk gauges on the key US Equity benchmarks held onto neutral readings after flirting with a risk off reading.
  • Metal Miners (XME) a leading sector, adding to recent gains amid continued inflation fears.
  • Volume was light on this week’s stock market rally with many more distribution days over the past two weeks still hanging over the market.
  • Real Motion indicates that longer-term momentum is still positive for equities while neutral on the daily charts.
  • Market internals have regained a positive outlook as have our Sentiment Indicators as volatility (VXX) dropped to levels not seen since before COVID hit.
  • Growth stocks (VUG) regained a positive footing verses Value (VTV).
  • Mish’s Modern family moved to a more Risk On mode as Semi’s led while Utilities and Consumer Staples (both risk off sectors) fell on the week.
  • Established Markets (EFA) gave up ground to Emerging Markets (EEM) with both holding on to recent short-term gains verses the US.
  • Long Bonds (TLT) are having issues under pressure with the 140-level showing as an important resistance level.

Cryptocurrency Update:

  • Look for a BTC breakout above the $40,500 level as a confirmation that a real recovery is underway.
  • Take heed of the positive announcements from central banks around the world including, United Arab Emirates, South Korea and even the United States week stating they are exploring the creation of their own Government Backed Digital Currencies (GBDC).
  • Some of the most prominent names in the investing world like Ray Dalio and Carl Icahn have expressed their intentions of getting involved in the crypto/blockchain space, signaling the beginnings of a paradigm shift of old regime billionaires to crypto converts.
  • Looking at BTC as the leader of Crypto currencies with over 43% of the market cap. We use it as the benchmark.

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