This train has more to run on the downside

Abraham George Macro View

Sep 24, 2020

The current turn in the markets should not come as a surprise to any readers of Breezy Briefings. For many weeks we have been harping on the idea that the equity, Euro and gold markets are due for a turn. Now we are getting it.

We are also at critical points of support. While we argued technical levels and sentiment were not supportive for further rise in the markets that we have been discussing, the sudden catalyst for the turn of events has been excessive speculation and uncertainty. So we will see how it can play out going forward.

Before that the political divide in the US is getting more wider while the elections could get into an ugly finish. Trump said yesterday that he expects the election “ will end up at the Supreme Court” (meaning a contested election). Now do you see the reason why the Republicans are in a hurry to get a Supreme Court judge of their choice in place of the position vacated by the late Ginsburg?

In the last report, we also highlighted about all the dirty activities some of the major banks were involved in. Reports are coming out that JP Morgan is willing to pay about one bio dollars in settlements for spoofing in trading that they have been accused off. What a bunch of crooks and hypocrites.

While the COVID situation is getting worse all over Europe, US and India, Israel has become the first developed country to go into a second lockdown.

Equities

The markets tried to rally yesterday but it was in vain. As I am writing this the Dow is breaking below a critical level of 26,600. Since our focus has been in the S&P 500 more, we had a look at the weekly charts. Now it looks more clear that a move down to 3000 to 3050 is very much in range.

Bonds

Bonds have remained in a narrow range in the past many days. We are still looking for a serious break down in bond prices.

Euro

There was a head and shoulder formation in Euro that we have been highlighting without labeling it. With yesterday’s price action it has broken below the neckline. The minimum downside objective is the region of 1.1450 to 1.1500. There is no reason for Euro to trade above 1.1870 now.

Gold

Gold continued its decline and has now fallen almost 10 pct from its top. It is approaching very critical levels to make a decision. Supports at 1825 to 1850 could hold for a further rise above 2072 to complete the pattern. Alternatively if it breaks below 1765, we will have to abandon all upside potential and will look for further downside.

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