The precious metals trade has been a very profitable one since early March, but the froth began to build on Thursday as gold futures hit 2063.40 overnight Thursday, getting within a 1% of its all-time high at $2075 an ounce and silver pushed through the $26 an ounce level. As we have indicated many times before, when things become obvious in this market and the momentum players begin to issue all clear signals in the form of so-called follow-through days, caution is advised. Both metals pulled back sharply on Friday as the market reversed following Thursday's strong post-PPI rally. Friday's action saw all the major market index spin around in wide ranges to close roughly where they started the day as the daily chart of the NASDAQ Composite Index shows below.
While big money-center banks Citigroup (C) and J.P. Morgan (JPM) gapped higher after earnings on Friday, regional banks remain mired in uncertainty. The SPDR Regional Banking (KRE) ETF in fact posted a high-volume reversal at its 10-day moving average and within a bear flag formation. Is this hinting at an impending bear flag breakout to the downside amid further trouble for regional bankers?
Gold made fresh 2023 highs on Thursday in a move that on the daily candlestick chart of the VanEck Merk Physical Gold Trust (OUNZ) looks a bit like a classic evening star formation. OUNZ went on to break its 10-day moving average but held on to close just one penny below the line. We would look for a possible test of the 20-dema from here.
An outside reversal on Friday sent the Aberdeen Physical Silver Trust (SIVR) back to the downside as it now looks set to test its 10-day moving average. It remains well above last week's breakout to higher highs as the 20-dema moves higher to serve as potential support near the breakout point if Friday's pullback extends further to the downside.
Precious metals stocks that we have favored since early March also pulled back on Friday. Most recently we identified long entries in Franco-Nevada (FNV) and Barrick Gold (GOLD) exactly to weeks ago in this report as they held tight along their 10-day moving averages with volume drying. Both stocks met up with their sharply rising 10-day lines on Friday where they found support and bounced off their intraday lows. Pullbacks like these that come into buyable support along the moving average offer reasonable entry points, and if gold is able to hold the $2,000 level then they may work.
Silvers Hecla Mining (HL) and Silvercrest Metals (SILV) pulled into moving average support on Friday and held. HL closed at its 10-day line while SILV held support along its 20-dema. If gold and silver prices do not fall further then these may be reasonable entries along moving average support which is then used as a selling guide.
On Thursday we reported on a potential pocket pivot in big-stock gold miner Newmont Corp. (NEM) but this failed promptly on Friday. NEM then shook out along its 20-dema which creates a second potential long entry signal, a moving average undercut & rally (MAU&R) using the 20-dema as a selling guide.
Bitcoin ($BTCUSD) closed ended the week above $30,000 for the first time since mid-May 2022. The ProShares Bitcoin Strategy ETF (BITO) broke out again on Tuesday on the move above $30,000 but made no further progress throughout the remainder of this past week. While it remains within buying range of the breakout, we would perhaps look for a more opportunistic entry on any test of the 10-day moving average if we can get it.
The market remains in a choppy phase with little in the way of clear trends. Spring earnings season has begun, and this may offer some clarity to the current market situation now that the latest inflation data is out of the way. More big-stock financials will report early in the week with big-stock NASDAQ names Netflix (NFLX) and Tesla (TSLA) expected to report after the close on Tuesday and Wednesday, respectively.
The Market Direction Model (MDM) remains on a CASH signal.