General Observations:
The S&P 500 and Dow Indexes are approaching their 50-day moving averages as they continue to chop their way higher off the mid-March lows. According to old rules, a so-called "follow-through day" was posted on Monday, the 11th day of the rally off the March lows, when the indexes were all up more than 1.5% for the day on higher volume vs. the prior day. However, in a market environment where the indexes can move more than 1.5% in a matter of minutes, such rules are relatively meaningless. Most stocks are still working their ways off their March lows and there is little evidence to distinguish the current rally, follow-through or not, from a bear market rally. Most bear market rallies are sharp with big gains on up days. Also, a distribution day that occurs right after the follow through day almost always results in a follow through day failure.
Both the S&P 500 and the Dow are showing black crosses where their 50-day moving averages have crossed below their 200-day moving averages. Meanwhile, the NASDAQ Composite Index is approaching its lower 200-day line while the NASDAQ 100 Index closed just above its own 200-day line on Friday. For now, the indexes, at least, are sustaining their rallies, but we do not believe investors have been given an all-clear signal to start piling into the market.
Meanwhile, more massive Fed money-printing is driving alternative-currencies higher. With the Fed announcing another $2.3 trillion "credit facility," essentially another expansion of the current wave of QE that has seen the Fed's balance sheet explode to $5.7 trillion, gold and silver shot higher with gold ending Thursday at its highest levels since March of 2013. We expect precious metals to move higher.
Silver is playing catch up as paper prices reach $15.91 for silver futures and the iShares Silver Trust (SLV) has rallied over 32% off its lows of three weeks ago. Physical prices are now in excess of $24 per ounce, a massive disconnect between paper and physical prices that could set up a catch-up move in the SLV and other silver-related ETFs such as the Sprott Physical Silver Trust (PSLV), which we prefer. The SLV posted a pocket pivot on Monday which we reported on at the time.
Meanwhile, Bitcoin, as measured by the Grayscale Bitcoin Trust (GBTC) is lagging. While the pattern looks comparable to silver, one must also consider that physical silver prices are at new multi-year highs. There is no "physical" counterpart for Bitcoin, but the GBTC has rallied over 50% from its lows of three weeks ago and also posted a pocket pivot two Thursdays ago, which we reported on at the time. GBTC has since held tight sideways along its 20-dema, so remains in a buyable position using the 10-dma as a selling guide..
From our perspective, it is the alternative-currency areas that look most interesting to us at this time given the uncertainty faced by stocks. From a QE perspective, the cat is now out of the bag, and we can generally be certain that the Fed will not be reversing this massive influx of liquidity any time soon, and this should remain bullish for the alt-currency space for some time.
The Market Direction Model (MDM) remains on a SELL signal. HERE is a recent report on the bull/bear situation.