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.

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