Equities continue to exhibit wild swings

There has been one constant in financial market movement over the last couple of years, and that is that market sentiment not only turns on a dime, but it is not rare to see a market trading strongly higher followed by a day in which it trades strongly lower with very little change in the underlying fundamental events which are supporting a market move.

The most recent example of this activity can be found in U.S. equities. With the Dow Jones industrial average containing three days in which it closed higher than the open, and two days in which it closed lower than the open over the last five trading days. After yesterday’s triple digit decline in the Dow of 785 points, today the Dow gained well over a thousand points closing up 1,173.45 points higher. While today’s gain was extremely impressive it was still smaller than Friday’s gain of over 1,200 points.

This extreme oscillation between major moves up and major moves down is indicative of the high level of uncertainty based upon the current coronavirus epidemic. While most analysts acknowledge that there will be an impact on global economic growth, the jury is out as to how severe the epidemic will be, and how long it will last before a vaccine is created.

One thing is for certain this is a scenario that has the potential to wreak havoc on economies worldwide that have been experiencing steady and solid growth since the conclusion of the 2008 financial crisis.

Just as in equities gold has had extreme moves both higher and lower over the last trading week. Today in comparison was rather meek with gold futures bases the most active April contract losing $7.80 on the day (-0.47%), and currently fixed at $1636.80. Today’s decline in gold was the result of both selling and dollar strength. The dollar gained ¼% in value today, which means that the additional 0.22% decline can be directly attributed to traders bidding the precious metal lower.

Spot gold closed off by five dollars today and is currently fixed at $1635.10. According to the KGX (Kitco Gold Index) $3.80 of today’s decline can be attributed to dollar strength, with the remaining decline of a $1.20 a direct result of selling pressure.

The rest of the precious metals were unchanged or higher on the day. Palladium continues to dominate in terms of percentage gains with spot palladium gaining $57 today, after subtracting $5.50 due to dollar strength. Silver closed in essence unchanged in both the spot and futures markets, and platinum futures gained $5.50 to close at 874.80.

Our technical studies indicate that there is major support at the 50-day moving average which occurs at $1572.20. Above that price point there is minor support at $1588 to $1597. The current level of support occurs at $1634 which is the 23% Fibonacci retracement level of the last rally. The studies also indicate that there is resistance just above current pricing with the first level occurring between $1543.00 and $1550. Above that there is resistance at $1665, with absolute resistance at the high achieved about a week ago when the market unsuccessfully challenged $1700 as it traded to a high of approximately $1690.70 per ounce.

Wishing you as always, good trading,