Gold And Stocks Catch Their Breath

March 13, 2020

London (Mar 13)  Thursday night and Friday morning brought us a coordinated attempt of a bullish reversal on many instruments. Interestingly, this upswing is present on both safe havens such as gold as well as more risky instruments such as stocks. This can indicate not the comeback of one particular sentiment but a comeback of liquidity. We’re not saying that this comeback will be permanent, most probably it will be temporary and of a very speculative character.

Nevertheless, here we are. Gold, after four strong bearish days in a row, is finally heading higher. The place where the reversal started was not random. The price used a combination of two supports: a horizontal one on the 1555 USD/oz and a dynamic one on the long-term up trendline. As for now, we are drawing a really beautiful bullish candle with a long tale. As long as the price stays above those supports, the sentiment is bullish.

Now let’s talk about SP500; the price bounced a bit but we are still deep in the bearish cave. Today’s bounce can be considered only as a dead cat bounce and nothing more. It’s worth mentioning that the current drop is already bigger than the one from 2008 and this time it took only four weeks! The price is now meeting the crucial long-term up trendline and the important horizontal support around 38,2% Fibonacci. This may be a good occasion for a bounce but with all the troubles around, I don’t see a chance for a rapid comeback to a bullish sentiment.

Lastly, a quick update on the EURPLN, which is having one of its best weeks on record. This doesn’t come as a shock since the price is under the influence of a nice inverse head and shoulders pattern. In addition, the most recent rise, broke the upper line of the symmetric triangle, which in theory can be an ultra-strong buy signal. The only obstacle here is the highs from 2018 and 2019 at around 4.4. That area will probably attract many sellers, so keep in mind that chances for a reversal on that resistance are quite significant.

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