Stocks attempted to maintain a bullish posture by gapping over our 89 line trendlines, and holding above SPY 290 for 4 days, before the renewed “tit for tat” escalating trade war aborted the rally, and crushed the market with nearly a 3% decline, with SPY closing 284.85. However, with the New Economy sector making new all-time highs vs the Old Economy two days last week, a market crash is ruled out at this time. Instead, we see a maximum decline in the 9% to 12% range (SPY 275.66 – 266.09) followed by months of sideways action, as the right shoulder fills out, and consumers get the liquidity they need in a “final hurrah” with massive refinancing, as interest rates approach the zero bound. It will take a Weekly close over 290 to turn our trends bullish again.
The cartel kept the metal at bay for most of the week, as it attempted to stay over 1500, but threw in the towel, as the trade war escalated on Friday, and Powell indicated he was prepared to continue to cut rates, although he saw the Fed’s power as limited. Gold spiked $39 off the low, and closed 1528, the highest close since April 2013. The market is approaching a cyclical high day next week, (August 27-28) and a correction is due, especially if the strident rhetoric dies down on the trade front. The gold shares restored its leadership with the highest close (XAU 97.78) since August 2016. Silver had its highest close (SLV 16.35) since September 2017, and will be looking to lower the gold/silver ratio to about 60 over the next several months. GLD Monthly Fib resistance 153.15. GDX Monthly Fib resistance 33.63, 46.37. SLV Monthly Fib resistance 26.19, 34.63.
A big reversal down day (UUP 26.77 to 26.51) as Powell indicated lower rates lie ahead. A break of UUP 26.30 on a Weekly basis will target 25.77.
Stocks fell 7.9% from the July 24 high last week – but you wont find it on the S&P chart. It is hidden by the collapse Monday by the e-mini futures which fell equivalent to SPY 278.39. The subsequent rally by the emini carried SPY to 288.04 by Tuesday’s close, a full 10 points higher. Stocks had every reason to turn our trends bearish with a Weekly SPY close under 289, but the spectacular rally, led by the new Economy sector on Thursday, brought SPY comfortably above our bearish 89 line trendlines, and in the process, significantly improved Breadth, so another strong bounce is likely before any immediate downturn. A bullish Weekly Squat on a 6 month plus high on volume further supports a rally. SPY Fib resistance 294.59. A Weekly close under SPY 290 turn trends bearish. Ultimately expect to see SPY Fib support 266.09, 249.30.
Spot gold surged $57, closing Friday 1497.50, after trading to 1510 over 3 days, finally held under 1500 by a heavy barrage of paper shorting by the cartel. Our short-term target for gold remains 1670, but will it do it by August 27, our projected date for an important top — or after the September correction? The gold shares (XAU) traded to the highest level since October 2016 (98.78). Silver finally broke through overhead resistance (SLV 15.73) closing 15.89.Silver should now take the lead and start to close the gold/silver ratio, with an initial target of 60 by the end of the year. GLD Monthly Fib resistance 143, 153.15. SLV Monthly Fib resistance 26.19, 34.63. GDX Monthly Fib resistance 33.63, 46.37.
The greenback fell less than 1% (UUP 26.46) off an 11 year high recorded on August 1 (UUP 26.79) in what is looking like a classic “3 drives to a top” (March 2015, January 2017, August 2019). A Weekly close under 26.22 turn trends bearish with an initial target UUP 25.76 Fib support.