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.