We need look no further than Turkey to understand the potential disaster faced by countries unable to keep up with general obligations. With dwindling foreign reserves of any kind and hefty debt, the country is forced to turn to allies for help, including U.S. swap lines. With tourism effectively halted, the country faces a significant risk of defaulting on its obligations in the coming months.
Gold is pulling back to the top side of former triangle resistance. If gold is bullish, then suppport should be 1716/22. I’m looking to buy in that zone for resumption of upside. If the noted zone fails to hold, then gold would turn extremely bearish because the recent breakout would be considered a completed terminal thrust from a triangle.
ES broke the noted level at the end of the day. 2885 is now resistance if reached and general focus is towards the 2637/97 zone (yellow box). The bottom of this zone was resistance in March. It’s also the 38.2% retrace of the decline from the February high. The top of the zone is VWAP from the low and the 3/13 high.
Since reaching the long term parallel (magenta line) on 4/13, gold has traded sideways. Price rolled over last week from short term trendline resistance so be aware of the lower boundary near 1683. A break below there would leave price action since 4/13 as a consolidation top. Immediate downside focus would then be the 3/31 low at 1576.
The devastating effect of Covid-19 on the US economy became clearer on Friday with the release of the highly anticipated US employment report.
ES found support today from VWAP off of the Feb high. This level was resistance in March and support in April. I am treating last week’s high as the bearish risk point but given the support hit today a bigger bounce is favored. Resistance should be 2890-2930.
To review, USDOLLAR dropped in 5 waves from the March high. The 4/14 low was right on the 61.8% retrace of the rally from the March low. At that point, I was looking for a 3 wave rally back to 12692. Instead, USDOLLAR has traded in a tight range. Price is nearing the 4/14 low. It’s not impossible that the rally into the 4/21 high at 12593 is the entire correction but the correction would be awfully small in both time and price retracement. So, it’s possible that a flat is unfolding. Under this scenario, a C wave rally (probably sharp) will begin from nearby levels (may or may not take out the 4/14 first).
Today may have been a lower high against the 4/17 high. Action since 4/13 has a head and shoulders look to it as well. In short there is no change to looking towards 2616/30 (bottom of the zone is VWAP from the low) in the near term. The chart below shows the current Dow chart with the Dow in 1929. The comparison is anchored with the panic lows. The rallies are similar. If this continues, then price would test the April lows (about 13% lower) before resuming higher. That would be considered the re-test but rest assured that if we did test the April low then most would expect a test of the March low and miss the buying opportunity. The April low in ES is 2424.75 and the 61.8% retrace of the rally from the March low is 2445.50. I think that’s the zone to focus on now.
Today’s ES break confirms the rally from the March low as a wedge. The implication is that the March low will eventually be re-tested. Near term, I’d still watch for a bounce from 2600/30. Proposed resistance is now the underside of the broken wedge line at 2808.