Major market indexes ended the week on a downbeat as the market sold off on a quadrupled-witching options expiration day. Heavy selling over the past week has sent all major market indexes lower with the sole exception of the NASDAQ Composite as money flows into big-cap tech names. Meanwhile the Dow, S&P 500, and small-cap Russell 2000 Indexes trade below major moving average support. We would be on the alert for any move back below the confluence of four moving averages on the NASDAQ chart as a harbinger of lower lows to come for the general market.
Two weeks ago SVB Financial Group (SIVB), parent company of Silicon Valley Bank and ground zero for the venture capital financing industry, was rated as an "investment grade" company. Today it has been zeroed out as the stock is delisted from the NASDAQ exchange. As Ernest Hemingway wrote in The Sun Also Rises, "How did you go bankrupt? Two ways. Gradually, then suddenly." Over the prior weekend, we also saw Signature Bank (SBNY) get shut down by regulators on Sunday, March 12th. This past week First Republic Bank of San Francisco (FRC) blew apart and continued to dive another 33% even after 11 banks pledge to deposit $30 billion into FRC as a cash infusion to keep the bank liquid.
These bank blow-ups are effectively third-order effects of Fed policy, and may only be the tip of the iceberg.The precious metals sector has been on fire as it diverges sharply from the action in stocks. The de-Dollarization theme now appears to be the primary driver for precious metals and other alternative currencies, including Bitcoin ($BTCUSD). The VanEck Merck Gold Trust (OUNZ) broke out on Friday as gold futures closed the week at $1993.70 an ounce.
Silver has lagged gold but appears intent on catching up to its yellow metal cousin as the Aberdeen Standard Physical Silver Shares (SIVR) have built upon a bottom-fishing buyable gap-up that was posted this past Monday. The SIVR then posted a pocket pivot as it pushed up through the 50-day moving average.
On Monday we reported on bottom-fishing buyable gap-ups in nine alternative-currency vehicles, including Bitcoin along with various precious metals related stocks. By Friday, these names were all posting more buyable gap-ups or big-volume pocket pivots as they all streaked higher. Members can reference the chart from Monday in the Past Reports section of the website, but as of Friday this is what that same chart mosaic looked like:
Every single one of these names has streaked higher including the ProShares Bitcoin Strategy (BITO) ETF. On Friday it gapped higher on big volume. As we discussed in Wednesday's live VoSI Market Webinar, this may be a defining moment for the big-crypto cryptocurrency in terms of its legitimacy in the minds of investors seeking to do nothing more than preserve capital. If the U.S. Dollar is about to collapse and your bank deposits are on the verge of being vaporized, what does anyone have to lose by pushing some of that cash into Bitcoin? And so, in a crisis situation, we may get a taste of the true value of Bitcoin.
On Thursday we reported on UiPath (PATH) as a buyable gap-up using the 16.63 intraday low as a tight selling guide. Despite the volatile and bearish general market action, the stock has held above that 16.63 low. Should the market by some chance find its feet and rally from here, this may be worthwhile as a BGU long set-up using the 16.63 intraday Thursday low as a tight selling guide.
The Market Direction Model (MDM) switched to a CASH/NEUTRAL signal on Wednesday, March 15th. The Fed announced they will protect depositors by creating the Bank Term Funding Program to avoid a bank run. They've pledged $25 billion but will likely have to do far more due to the $620 billion in bank bond losses. JP Morgan thinks the Fed may have to create as much as $2 trillion to deal with the crisis. This potentially ushers in a stealth form of QE5 despite rising rates in an inflationary environment. This together with increasing M2 from China and Japan could hibernate the bear. But it is likely the Fed will only print just enough due to high levels of inflation. Still, the Fed's balance sheet quickly rose by $303 B over the last few days. As the current situation remains extremely fluid heading into Wednesday's Fed policy announcement things could change quickly.