Markets have remained volatile in the wake of recent bank failures. A sharp sell-off following Wednesday's Fed policy announcement failed to break the indexes by weeks end, but the situation remains tenuous, at best. Market have traded in wide ranges over the past three days as the market balances the potential for more bank failures against the fact that if things get bad the Fed will come riding to the rescue with a massive resumption of QE. The NASDAQ Composite is the only major market index trading above its 50-day moving average as money moves into large-cap, long-term established big-cap techs in what appears to be a defensive rotation. Overall the action remains highly volatile on an intraday basis and mostly uninvestable.
Gold and silver have continued to rally in what we refer to as a Lifeboat Trade. Fears of more bank failures combined with the potential for the Fed to unleash QE once again has kept them buoyant as they will likely benefit from both or either event. Gold broke out this week, as the weekly chart of the VanEck Merk Gold Trust (OUNZ) shows below, and is currently wrestling with the psychologically important $2,000/ounce price level. It briefly rallied above 2,000 overnight on Monday morning but has since pulled back. If it can decisively clear the $2,000 level it would certainly have bullish implications.
The Aberdeen Physical Silver Trust (SIVR) continues to move higher with its yellow metal cousin and on Wednesday posted a sharp pocket pivot at its 50-day moving average. That move became extended rather quickly but SIVR can be watched for buyable pullbacks from here, either into the rapidly rising 10-dma or the deeper 50-dma.
Miners and precious metals related stocks have continued to lead. Osisko Gold Royalties (OR) has remained the leader in the space after breaking out last week, but other names in the group are flirting with breakouts as well.
Junior gold miner Alamos Gold (AGI) is also showing strong leadership action within the group. It broke out on Thursday and remains in buyable range of the breakout, using the 10-dma or 20-dema as more reasonable selling guides.
Senior gold miner Agnico-Eagle Mines (AEM) posted pocket pivots along its 50-day moving average on Thursday and Friday. These remain actionable using the 50-dma as a tight selling guide.
Bitcoin has also benefitted from the Lifeboat Trade. There are several ETFs and ETNs that provide reasonable vehicles for playing a continued upside move in Bitcoin. These would include the ProShares Bitcoin Strategy ETF (BITO), the Valkyrie Bitcoin Strategy ETF (BTF) , and the venerable Grayscale Bitcoin Trust (GBTC). All have moved together in synchrony as they have also correlated closely to their alternative-currency cousins in the precious metals space. We would view the rapidly rising 10-day moving average in the GBTC as a possible lower-risk long entry spot on any constructive pullbacks into the line from here.Two weeks ago we reported on a large number of bottom-fishing buyable gap-ups (BFBGUs) that occurred on March 13th. A group chart of names that were discussed in that report shows the gap-up moves two weeks ago and the steady uptrends that have occurred since then as the lifeboat trade has panned out well amid the current banking crisis and the collapse of SVB Financial Group (SIVB) and Signature Bank (SBNY). Even as government regulators and officials assure us that the U.S. banking system is "safe" and that the worst of this banking crisis has now passed these names do not seem convinced.
While the issues that torpedoed SIVB and SBNY were ascribed to regional banks it does not appear that large financials like the money-center banks shown below are buying into any "all clear" rhetoric from government regulators and officials. Until we see these charts as well as the charts of scores of regional bank stocks stabilize and recover, we would not assume that the current crisis is indeed over.
This remains an extremely challenging market. Event risk remains high as more bank failures may be lurking. For that reason, we do not believe this a constructive environment for position-building trend-followers on the long side. It remains a highly tactical market suited to rapid-fire short-term traders and day-traders.
The Market Direction Model (MDM) remains on a CASH/NEUTRAL signal.