Stocks, Gold & Dollar Commentary March 23, 2020

Stocks

Stocks plunged 15% last week, falling to the lowest level (SPY 228.02) since March 2017, bringing the total decline since the high just 23 days ago to 33%, as the coronavirus became a world-wide pandemic. With many key industries shutting down to stem the spread of the virus, dire predictions of as much as a 14% drop in second quarter GDP is putting investors in “get-me-out” mode. Governments are fighting back with promises of unprecedented fiscal largess to fill the economic hole. At this point, we see massive support at SPY 210-212, suggesting another eventual 8% decline. But first, on the bright side, there is a huge bullish divergence with Market Breadth, showing an 85% reduction in new 52 week lows compared to 7 days ago with the SPY 5% higher, so the potential exists for a monster rally, should any positive news emerge on the containment of the virus. SPY support 210 – 212. SPY resistance 283.66.

Gold

Gold’s largest single day range in years, (high 1572 and crash low 1446) was made on Monday, settling on Friday 1498, losing $32 on the week. The gold shares (XAU) had unprecedented volatility (high 86.58 and low 62.72) settling virtually unchanged (70.12) establishing leadership vs the metal. We expect another 2 1/2 weeks of wide ranging choppy trading, with an important low due on April 8, before a break-out to the upside, with spot 1800 – 1850 as a reasonable target to be reached during the Summer. SLV fell 15%, closing 11.62, putting spot around 12.32, but transactions in the coin silver market are $7 over spot, if you can find it, proving that the futures and ETF’s remain fictitious markets. Fib resistance levels: GLD 152.57, GDX 28.00, GDXJ 37.67, SLV 15.35, GOAU 15.65.

Dollar

The greenback started the week with a sharp 4.0% decline (UUP 26.33) getting under our key trendline (UUP 26.52), but as panic resumed in the financial markets, its safe haven status was bid, with a huge rally to new multi-year highs (UUP 28.90) settling back to 28.01 by Friday’s close. As this huge fiscal stimulus gushes over the economy the next several months, higher inflation numbers are coming, and a dramatic weakening of the Dollar is likely.Weekly close under 26.58 turns trends bearish.

Stocks, Gold & Dollar Commentary March 16, 2020

Stocks

No where to run, no where to hide…was the over-riding theme of last weeks market debacle, as a worldwide biological pandemic finally sunk into the public consciousness. Stock markets around the world collapsed in unisom.From a theoretical high and low (based on the Futures) the S&P 500 (SPY) fell 29%, recovering on Friday with a comeback 10% gain. A huge bounceback by the New Economy sector — almost reaching new highs vs the Old Economy — strongly suggest the rally has more room to run. At the markets most dire point —  to stanch the bleeding —  the Fed announced an unprecedented $1.5 trillion lending program, with $500 billion of that to be settled same day, suggesting there is short-term liquidity issues, particularly with Euro bank stocks collapsing. With a triple shock to the economy (Supply, Demand, and Financial), it remains to be seen whether Fed action is enough to mitigate the negative wealth effect society will be experiencing. A short-term cycle high is due March 23/24.SPY Fib resistance 289.95, 301.61 (strong).

Gold

Throwing the baby out with the bathwater was no more apparent than the utter disdain investors felt about the gold stocks, with the XAU beaten down 39% from the high (113.73) just 15 day ago. The “pause” in gold was a bit more than expected, — all compressed in one week — as the metal had a $200 range, (1704 high on Monday to 1504 low on Friday) closing 1530. The big reason: The Dollar spiked 5.5% higher, going from a “flash crash” to unprecedented international demand turning into a frenzy, as markets crashed around the globe. Spot gold support 1500 (strong). Precious metals investors should treat last weeks sell-off as “a gift from god”, as I fully expect these losses to be reversed quickly. Over the next 2-3 weeks, we expect the golds to be range bound, with an important cycle low due the first week in April. Next intermediate term target for spot to be reached during the Summer, 1800 – 1850. Silver suffered twice the decline in percentage terms as gold, falling 24% over 15 sessions with SLV closing 13.69.XAU Fib resistance 91.69, 96.89. GDX Fib resistance 23.01, 25.98.GLD Fib resistance 150.48, 157.57. SLV Fib resistance 15.58, 16.08.

Dollar

The greenbacks volatility was unprecedented. UUP range for the week: 24.64 (flash crash low) – 27.97 (high) Close 27.44 up 5.5% for the week, as the greenback went from pariah to safe haven in 5 days. With Fed money-printing going off the charts, the greenback will be back to pariah soon enough. Weekly close under 26.52 turns trends bearish.

Stocks, Gold & Dollar Commentary March 9, 2020

Stocks

While news of coronavirus infections came to nearly 100,000, the SPY engaged in unprecedented and historic volatility, but did not break the low (285.54) of the previous week, and actually closed slightly higher, generating a Bullish Weekly Squat. The Fed, acting preemptively, cut the Fed Funds rate 50 basis points, but did little to alleviate the stress in the overnight funding market, which saw an all-time high in overnight funding of nearly $115 billion, creating near certainty that another QE is coming, with the potential new liquidity a boon for stocks. With this opening salvo of Fed vs coronavirus, there’s credible talk (Janet Yellen & Eric Rosengren) allowing the Fed to buy stocks, indemnifying against losses. It’s interesting to note, the New Economy sector lagged the rally, closing the week with 6 day lows when compared to the Old Economy. An important cycle high is due March 23/24.SPY near term resistance 312.76. SPY resistance 318.63. SPY support 276.86, 274.86.

Gold

The precious metal opened the week on the low (1574.50) and then an historic one week rally of $118 to a Friday high (1692.70) where it ran into desperate Cartel selling, driving the price down an unprecedented $50 (1642.30) before settling 1673.50. As researcher Rolan Manly writes, “If paper gold prices continue to go lower in the presence of continued high physical demand, more paper market participants would want to convert their paper (unallocated positions and futures) into physical holdings. Given the very small physical gold stocks underpinning the London over-the-counter and Comex markets, an increase at the margin in conversions could overwhelm the ability of the paper markets to deliver physical — Comex-deliverable contracts”.There is no stopping this bull market with initial price targets for spot 1800 – 1850, but first a likely pause. Spot gold support 1614 (strong). Near term support: GDX 28.30, GDXJ 37.61, GLD 151.63, GOAU 15.20, SIL 27.83, SLV 15.71.

Dollar

The greenback collapsed — losing safe haven status — with the biggest one-week drop in years — falling 2.3% — (UUP 25.92) double-bottoming at the 12/31/19 low, before a slight bounce (26.02). Fib Resistance 26.29.