Stocks rallied a monster 10.4%, exceeding our upper boundary (SPY 273.45) by 2.8% (281.20), on additional Fed emergency cash injections of $2.3 trillion to prop up the coronavirus devastated shutdown economy, as 13.5 million Americans filed for jobless claims the past 2 weeks, the most since 2008. With the Fed’s balance sheet headed north of $7trillion, and the fact they have started buying junk bonds, will make THEM the market, with the implication of Fed action not fully understood by market pundits at this time. Read: Hyper stagflation coming. The New Economy sector which led the bull market, has severely lagged the rally, (16 day lows) when measured against the Old Economy, the largest disparity in over a year, strongly suggest the advance should come to an abrupt end. SPY near term support 262.65. SPY support 253.09. For the intermediate term SPY support 217.36. SPY maximum resistance 292.74.
Gold had a strong week, gaining $64 to 1686. The gold shares (XAU) tacked on 16.4%, closing 98.22, and recorded a 5 week high when measured against bullion. One more pull-back is likely needed, before the next bull phase, which will take the metal to 1800 – 1850 as a first stop. The high energy up-day on Thursday, likely puts off the bottom until April 20/21.The gold shares (XAU) know somethings important will soon happen – having rallied 57% in 19 days. After the gold bottom is in, we’ll be looking for a strong Weekly close over 1704 to launch the market off a large H&S bottom formation to spot 2000. GLD 182.38. Long term targets GDX 45.50, XAU 164.74.
The greenback fell 1.2%, (UUP 26.95) but held above trend support UUP 26.63. A Weekly close under 26.63 turns trends lower. Fib resistance 28.00.
Stocks had a volatile week –rallying at the outset — declining by weeks-end, with the net result less than a 1% decline, with SPY closing 248.19. Important SPY support 234.93. Long term SPY support 210 – 212. SPY resistance 273.45. A bleak jobs report came as expected with a loss of 701K jobs in March, with the unemployment rate shooting up to 4.4%. Despite the unprecedented passage of the CARES act, GDP will collapse in the months ahead, but the stock market’s 33% decline thus far, has largely discounted the GDP collapse, and will be supported by the amount of government goodies being thrown at the economy. This bear market is somewhat unique in that it is both Structural (financial bubble) and Event-Driven (coronavirus pandemic) and will require many years to play out (no new highs). We expect over the next 3 months stocks to be range-bound, with 273.45 on the high end, and 217.36 on the low end.
The gold market has experienced unprecedented volatility in recent weeks (XAU range 113.73 high, 62.72 low, Friday close 84.36 – Spot Gold 1704 high, 1446 low, Friday close 1622) as investors bailed out to raise cash, for the most part to meet margin calls on stock holdings. That stress liquidation is now history. It’s important to note that there is developing a critical shortage in physical gold, as the global pandemic has caused a shut-down by the 3 largest refiners in the world in the Canton of Ticino in Switzerland.*This event should cause the physical market to separate from the fraudulent paper market. An important low is due this week (April 8-10), and then the next bull phase is set to begin, with a spot gold target 1800 – 1850.*Matterhorn Capital Mgmt Fib resistance levels: GLD 157.81, GDX 28.00, GDXJ 37.67, SLV 15.35, GOAU 15.65, XAU res 93.75. Long term targets: GDX 45.50, GLD 182.38, XAU 164.74.
The greenback held important trend support (UUP 26.61) Actual low 26.67. Then, bounced 2%, (UUP 27.29).Fib resistance 28.00. A Weekly close under 26.61 turns trends lower.
As the world-wide coronavirus pandemic reached epic proportions, stocks collapsed limit-down to start the week, with SPY touching the theoretical level 217.36 (based on the futures), then spent the next 3 days rallying close to the Fib 38% retracement of the entire decline to 263.96. Actual retracement high 263.35. Also, based on the futures. With the Fed stepping in for unlimited bond purchasing (QE to infiniti) and emergency facilities to bolster credit markets, along with programs to lend to cash-strapped American businesses, in combination with the $2.2 trillion fiscal life-line passed by Congress, the firepower is there to hold the stock damage to SPY 210 – 212, in the intermediate term. The stock market 3 1/2 year bull run is over, but came off 20 months of SPY support in the 210 – 212 range, covering years 2014, 2015 and 2016. However, until there is more visability on the true damage to our economy, all bets on the long term are impossible to predict. Near-term SPY support 232.07. Long term SPY support 210 – 212. SPY resistance 273.45.
As fear gripped the financial markets, gold fulfilled its true role as the ultimate safe-haven, an asset with no corresponding liability (despite the on-going fraudulent paper markets) by rallying $128 on the week (1625.50). The gold shares rallied 17%, and resumed leadership vs the metal. A short-term low is due April 3, with a more important low April 8. The bull run should start with 1800 – 1850 as the next intermediate term target. Fib resistance levels: GLD 157.81, GDX 28.00, GDXJ 37.67, SLV 15.35, GOAU 15.65, XAU res 93.75. Long term targets: GDX 45.50, GLD 182.38, XAU 164.74.
The greenback collapsed under the weight of Fed stimulus — falling 4.6% — over 5 straight down days, with UUP closing 26.72. A weekly close under 26.61 turns trends bearish. Look for 26.35 for Fib support in the short term.