TradingShot

S&P and GOLD during the subprime crisis. Will history repeat?

TVC:SPX   S&P 500 Index
This is not a trading advice, just something interesting I want to discuss with you all.

A lot of analysts claim that the COVID outbreak will put global economies into recession and that we are at the beginning of a Crisis similar to the 2007/08 Subprime Crisis. Gold has been the standard of "Store of Value" and one of the biggest winners of 2019 as well as 2020 (thus far). If we are in a "Subprime like" crisis on stocks, what are the implications for a safe-haven like Gold?

** Before we start, please support this idea with your likes and comments, it is the best way to keep it relevant and support me. **

Looking at S&P's 1W chart we can find a relation (so far) as following the late-February/ early March 2020 crash, the market broke below the MA50 but recovered and is at the moment testing it as a Resistance. Similar to what happened in April 2008.

At the same time Gold had a disappointing March as it was sold off aggressively along with the stock crash. Contrary to S&P , it found support on its 1W MA50 and has been rebounding since (making also a new marginal High). Similar to what happened in April/ May 2008 (with the exception that it almost touched its High).

During the Subprime Crisis both S&P and Gold collapsed to new lows; S&P brutally erased the gains of +10 years while Gold even though it broke below its 1W MA50, it only marginally broke its 12-month lows.

So if history repeats itself and S&P tanks during the COVID crisis, will Gold break its 1W MA50 but respect its 12-month support? It will surely put its attribute as "safe haven" to test!

Do you agree that if the 2007/08 crisis is repeated Gold will pull back even by that much on an asset-wide liquidation event, or will firmly hold its 2019/2020 gains? Any other scenarios you want to discuss? Feel free to share your work and let me know in the comments section!

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Comments

i hope you are right, as i am already short s&p an long gold!!
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what if the current test of 50MA on S&P is just like what was going on late April / early June 2009 instead of May 2008, since the unlimited QE made the crash this time in smaller scale and shorter time frame?
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Good analyses
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Nice analysis and discussion, tyvm; been wondering myself ofc are we gonna see a higher low, or another brutal crash?

This crisis is triple trouble, it's a medical death threat, but it put 15% of Americans out of work and shut down business and travel.

Later this year we will experience another mortgage crisis when the unemployed cannot pay for their homes. This takes longer to rollout.

The rally forms a Bearish Gartley now, see my analysis for 21 May projected top ~3K SPX. Ty for post!
https://www.tradingview.com/chart/SPX/kCKmLqIr-SPX-Bearish-Butterfly-Pattern-Completing-3K/#tc3595076
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I really don't think Gold will need to retest lows before rallying. But honestly don't have any TA to back that up.It might just be that I was much more inexperienced during the 2007 financial crisis, but I was already in gold long before COVID broke because of the overextended fundamentals in the stock market... I think that most of the gold gains in the last 2 years were from INVESTORs rather than traders ... Or at least swing traders...Basically I feel like this market crash didn't surprise me as much as 2007... but again this is subjective
+1 Reply
looking good, appreciate it.
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As always, the top TA to be found!

Back in 2008, a time I clearly remember, I see on your charts how the S&P sold in May and went away, and that was a 2 week bump to gold, then it was their turn to sell off.

What you have published here, is what I've been gaming in my head and on my trackers, but could not articulate as you did here. Thank you!
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No idea about Gold, but expect S&P to look very different due to the timing of stimulus.
+2 Reply
The US markets are showing an amazing strength given all the negative data. Your pattern with the 50 MA seems to be making perfect sense and kind of matches. I keep telling myself "Why is the market not crashing", maybe we first need to bounce of the 50 MA. Thanks well spotted.
+4 Reply
ReallyMe CarpeMomentum
@CarpeMomentum, The market is not crashing because it is no longer about what is really happening. It's a gigantic simulation game and battle of the AI algorithms of the big players -- "How far can we go to deceive and rip off the other side and retail investors a little bit more?"
+2 Reply
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