Uncertainty is coming from the Coronavirus as we do not really know the real scale of the outbreak. The thing that it originated in China make it even more complicated. Traders did not really believe if the official GDP data is legitimate, so we should not be surprised that they are also suspicious about the numbers of the deaths or people affected.
SP500 ended last week and starts a new one in the same manner – with a huge drop. The heads and shoulders that we mentioned on Thursday, works. Price managed to break the dynamic support connecting higher lows since the beginning of December. Now, we are aiming one connecting lows since October. Buyers should not worry too much though. We still have many major supports that can stop the decline. Remember that American indices love V-shape reversals and for the past 10 years, every stronger drop was rapidly turned into a buying bonanza.
On Thursday we also warned about the correction od DAX. There was no surprise here and German Index also declined. Here, we also have a Head and Shoulders formation and currently, the price is breaking the neckline. As for now, it is nothing serious and European Bulls remain strong.
Risk OFF mode usually means stronger gold. It is not different now. On Gold, I can see a small Inverse Head and Shoulders pattern. It is not the prettiest one but trading is not a beauty contest. Principle is here: the price made a double bottom formation, then tried to go down again and failed breaking the neckline. As long as we are above the neckline and the orange support, sentiment seems positive.
This article is written by Tomasz Wisniewski, Director of Research and Education at Axiory