With daily leaks of a successful Phase 1 in the China/US trade deal saga, stocks tacked on another 1% gain, with SPY reaching for its big target of 311 (actual high 309.65) amid negative crosscurrents of rapidly weakening Breadth, a classic Bearish Weekly Squat on 8 month low in range vs positive all time highs in both the New Economy and Old Economy sectors, with the New Economy leading, juiced by $250 billion in new liquidity in the past 8 weeks. This smacks of desperation by the Fed, despite a still growing economy of 2%. We still believe there will be no major sell-off in stocks until we see the start of a clear breakdown in the New Economy sector. Until then, expect only minor pullbacks of the “run-of-the mill” 2-4% variety.
The precious metals had the biggest sell-off in years, (gold down $56) after struggling for the past 3 weeks to take out spot 1521 (breakout level for next bull run) stalling at 1516.50, 1518.70 and 1516.70 over the course of 6 weeks (in retrospect a “3 drives to a top” sell, finally succumbing under a blitz of paper against the backdrop of a possible successful China/US trade deal. A strong Dollar (up 1%) contributed to the bearish sentiment. Silver faired even worse, dropping 7% (SLV 15.70). Strong Fib support GLD 135.89, GDX 25.65, SLV 15.38. The bull market in the PM’s is by no means over, and the next move up will likely coincide with a stock market top.
A strong week for the greenback. The UUP promptly reversed, after closing under our 89 line trendlines, and rallied 1.2% to overhead resistance (UUP 26.89) closing 26.90. Maximum upside is 27.04. Range trading for 2-3 weeks between 27.04 and 26.54 is the likely scenario.