Stocks fell sharply for 5 straight days, almost reaching our projected decline line of 4% – 6%, (actual decline 3.9%) in the first salvo of a much larger sell-off to come. SPY now sits in a broad area of support, having touched our two 89 line trendlines which have merged. While the stock sell-off was broad-based, led by the New Economy sector, which registered an 18 day low, it paled in comparison to the 10 year Treasury, which collapsed 6% in one day, the sharpest decline in 4 years, to 1.832%. Over the next week, or so, we expect a good bounce, on light volume, to take SPY to 295.23 – 297.90, before the onset of a more protracted decline, which will start with a Weekly close under SPY 289, turning our trends lower.
Another wild week for the precious metal, which ranged from 1433 to 1400 (after the Fed cut rates 1/4 point) back to 1448, closing 1440.20, the highest close in 6 years. Spot gold is projected to reach 1670 (off the H&S bullish bottom formation) by the Fall 2019, at which point a major correction is likely. GLD Monthly Fib resistance 143, 153.15. The gold shares (XAU) surrendered leadership (at least for 1 week), after dropping 7% mid-week (XAU low 86.01) before snapping back to close the week with a minor plus sign. GDX Monthly Fib resistance 33.63, 46.37. Silver gave ground vs gold, falling slightly. The bull market in silver is underway, and we expect spectacular gains ahead. Fib resistance very near term 15.73. Long term based on our Monthly chart, SLV Fib resistance 26.19, 34.63. As discussed last week, the gold/silver ratio, as a first major stop, will drop to 60, as the bull market gets underway. With gold reaching 1670, at a gold/silver ratio of 60, silver would trade to 27.83.
On the news of the Fed rate cut, and with the world scrambling to repay debt in Dollars, the greenback spiked to a 31 month high (UUP 26.79), then came off by weeks-end, only up slightly (UUP 26.59). Weekly close under 26.15 to turn trends lower. UUP 25.76 strong support.