Before the opening bell on Friday morning (3/10/23), amid the unfolding chaos surrounding the Silicon Valley Bank debacle and in the aftermath of the release of the February Jobs Report, Mike Paulenoff posted the following chart-based commentary for MPTrader members:
"In the aftermath of the Jobs Report, the Dollar (DXY) is weaker, and Gold (GLD) is stronger. Or put a different way, the combination of the Jobs Report and the uncertainty created by the SIVB has pressured the Dollar and lifted GLD.
"Bottom Line: the dollar is down 0.5% which is providing support for GLD, but GLD needs to climb and sustain above 172.50/80 to trigger a near term upside reversal signal that will project to 177-178 initially. As long as support at 168.00/30 contains any forthcoming weakness, my pattern work is constructive for upside continuation above 172.50/80... last is 171.62."
At the time, little did Mike (or anyone else for that matter) suspect that within three hours, the FDIC would have to intervene to stop trading in SVB (symbol SIVB-- see Mike's chart below) to place the bank in receivership, that the US Dollar (DXY) would be pressing much lower, and Gold (GLD) would be pushing up through Mike's key near term resistance plateau of 172.50/80.
By the end of Friday's session, GLD had broken out to the upside and was trading at 173.87, 1.3% above where it was trading when Mike posted his update to the Coverage List.
Into the close on Friday, the reaction of Gold (GLD) to a potential liquidity crisis and equity market meltdown was anything but the usual exodus from the most liquid instrument to raise cash. This time might be different. Gold (GLD) was bought Friday!
Given the rampant speculation about forthcoming remedial action by the FDIC and the Fed, perhaps right in front of this week's CPI, PPI, and Retail Sales data, and next week's FOMC meeting (expected to result in at least a 25 basis point hike in Fed funds to 4.75%), we can only surmise that a prudent course of action for Powell & Company for the nearer term is to reduce additional financial market anxiety and systemic stress by tempering rate hike expectations. In any way, shape, or form, should Powell indicate he is taking his foot off of the monetary brake pedal, however temporary it might be, and at the same time the markets sense that the SVB situation is not as "contained" as investors figure it should be, then the US Dollar (DXY) and Gold (GLD) could be canaries in the coal mine, alerting us to a new, "emergency plan" that backstops the domestic and international banking system, and by extension, US economic well being.
Mike's attached charts of DXY and GLD argue strongly that the former is rolling over into a new down-leg after a completed counter-trend rally, while the latter has pivoted to the upside in the aftermath of 4 to 5 week pullback.
