An unexpected ‘safe haven’ to stash your cash during the banking crisis
The CPI came in better than expected this morning – and by that I mean it hit its mark right on the head.
This is – at face value – great for the market as it didn’t offer any surprises.
And with the market coming off a surprise like we saw last week with Silicon Valley Bank (SVB) it offered a moment to breathe and reset.
This is critical for the market because we saw the fear index (some of you call it the VIX) soar over 30, and that little bit of fear is really trying to price itself into the market.
So, everybody is trying to find a comfortable spot to sit in a dark and uncomfortable spot…
And I wouldn’t look at SVB as just a scare in the market, it was a shift in tectonic plates beneath the market that would have measured a 6.0 on the Richter scale and the aftershock is going to be much stronger in the coming weeks.
In the case of this tectonic shift in the market, the fault line is the regional banks…
We started to see a bit of a shift last week as the regional banks were starting to post some unusual options activity.
Was this somebody who knows something? That’s likely not the case.
But regardless of the rumors and theories, the matter of fact is there were signs of distress in the sector.
If you were watching the SPDR S&P Regional Banking ETF (KRE) as I’ve been over the past several months, you likely saw that it was starting to slip:
First, it took out the 200-day moving average (MA200), then followed the 50-day moving average (MA50), then everything went to hell in a handbasket.
Now you know how I feel about that MA50 – it’s the trend line to watch. And in this case, the trend was neutral while the rest of the market had the MA50 trending higher.
That is a sign that the fault line was starting to rumble.
All you need is some sort of catalyst for the selling pressure to ramp up and turn the trend negative.
This is the earthquake that shook the sector to its core…
Whenever you hear about an earthquake on the news, the next thing you should be thinking about is the aftershock – The same goes for the market…
But to start to understand where the market is going to move in the next couple of months we need to pull out the 2008 playbook and let history tell us what is to come.
The thing to remember is history doesn’t always repeat itself – but it sure as hell rhymes…
Back in 2008, we saw a slow slide on the KRE, nothing compared to the drop we are currently experiencing.
Nonetheless, the violent sell-off was preceded by a break below the MA200 and the MA50, AND and neutral MA50…
Back then, it came out of the bottom and BOOM, there was some volatility to the upside followed by some good trading as it continued to rally.
That’s when the aftershocks hit, we found out that there were some bad bets being made and manipulated balance sheets…
As I said, history isn’t always going to repeat but it absolutely rhymes…
This is going to continue to play out over a few months and the financial sector is going to be on the rocky ground every time Jerome Powell opens his mouth to raise rates or talk about inflation.
But, there is a ‘safe haven’ that is rising from the ashes as people continue to lose faith in the financial institutions…
And this is something I never thought I’d be saying but, Crypto and Bitcoin (BTC).
Starting last week when there was a mass exodus from the financial sector there was almost a one-for-one inverse correlation happening in the crypto markets.
People are starting to park their assets in crypto as it almost feels more stable than it is at a traditional bank.
Now, you all know I’m not the crypto guy, talk to Nick Black for that, but if you are like me and don’t have your cold storage and crypto wallet set up you can still take advantage of this shift.
The first place to look is going to be Grayscale Bitcoin Trust (GBTC):
GBTC as we speak is breaking above the top Bollinger Band, along with the 20- and 50-day moving averages climbing higher, and has a ton of trading potential.
Along with that – and I talked about this with my Night Traders yesterday – is Coinbase Global Inc (COIN):
This one is only up 4.9% as of this morning but was up nearly 12% in pre-market trading so there is a ton of push and pull on this stock but, time it correctly and you’ll be able to get into this trade and see some returns, no questions asked.
Just like GBTC it’s about to break above the top Bollinger Band and is currently holding the MA50…
I’m champing at the bit to buy calls on this one – that’s right I said CALLS (maybe the sky really is falling).
And what sweetens the deal, even more, is COIN has Bollinger Bands that are sitting around a 6% spread from what we have seen in the last year, this tells me there is a volatility moment brewing right here on this chart.
And of course, after diving into the wormhole with our friend Boom last night, we agreed that there is one other place to safely park your assets that ISN’T crypto – if you’re entirely averse to it and that’s the SPDR Gold Shares (GLD):
This is one that is starting to flash the same signs that it did back in 2008 – what I mean by that is people still look for traditional safe havens to park their cash.
In 2008 – when the crowd rushed into gold – you can see the Relative Strength of GLD VS the S&P 500 proves that gold will be an outperformer when the market is in crisis…
Stick with me as we continue to work through the great Financial Fumble of 2023 and I’m happy to keep guiding you through this so you can profit every step of the way.
Also, make sure you join me tomorrow morning as there are a few market events that are trying to hide in the shadows of the CPI number and SVB headlines (Hint: one of the market events comes from Apple Inc (AAPL) see you tomorrow morning at 9:45 AM EST right in the main room for The Long and Short of it
March 14 2023