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U.S Equities Vis-à-Vis the Dow Lose 800 Points Over the Last Two Trading Days

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U.S. equities sold off sharply today having the worst performance in a single day since August 23. As of 4:06 PM EDT the Dow Jones industrial average has closed down 494.42 points, a net decline of 1.86% today with the average currently fixed at 26,078.62. The Dow is having the worst weekly performance since May, with all 11 sectors closing lower on the day. The Dow as well as the S&P 500 are starting this quarter with the worst performance since the 2008 financial crisis. Many of the mitigating factors and fears that were present during the 2008 recession seem to be reemerging.

Many analysts are citing historical declines that have occurred in October, which include the decline of 1929, 1987 and 2008. Now for the second day in a row, traders continue reacting to the deeply concerning manufacturing report that was released yesterday. Yesterday’s manufacturing data indicated that the largest contraction from August to September in 10 years.

This strongly bearish news in regards to global equities has shined an optimistic light towards the safe haven assets such as gold and silver which both had a stellar performance today.

As of 4:16 PM EDT, gold futures are currently up $17.70 which is a net gain of 1.19% and fixed at $1506.70. On a technical basis this is extremely bullish for a number of reasons. First today’s price increase has taken gold back above its 50-day moving average, a price level used by many analysts and market participants to determine whether or not a commodity is currently in a short-term bullish trend.

It was only two days ago when on Monday gold prices broke below that key level, which was followed by yesterday’s decline to the lowest price point gold is hit since the correction began on September 5.

After gold traded to a low of approximately $1464 it recovered and closed near $1490 per ounce. However, that price point was still below the key psychological support level of $1500 per ounce as well as the 50-day moving average.

Today that all changed when gold pricing began to surge to the upside breaching the key psychological level of $1500 per ounce and then trading above its 50-day moving average which is currently fixed at $1503 per ounce. That is a strong indication on a technical basis that the correction that began after gold hit its yearly high of $1565 has concluded. Only time will tell if this is the beginning of the next leg of a rally in gold which could take pricing to a new yearly high.

Wishing you as always, good trading,

Gary S. Wagner - Executive Producer