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.

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