There's no doubt that "bearish" sentiment has surged in the markets once again... CNN's Fear and Greed Index shows this clearly. It's a gauge of investor sentiment based on seven indicators.
A Warning Sign for This Typically 'Safe' Investment
By Ethan Goldman, analyst, Chaikin Analytics
There's no doubt that "bearish" sentiment has surged in the markets once again...
CNN's Fear and Greed Index shows this clearly. It's a gauge of investor sentiment based on seven indicators. And in its reading earlier this morning, the index stood squarely in "extreme fear" territory.
Of course, it's not hard to see why investors are scared...
The State Street SPDR S&P 500 Fund (SPY) is down about 4% in the past month alone.
As you know, this is due to the ongoing conflict in the Middle East – and the de facto closure of the Strait of Hormuz.
To make matters worse, investors have been scrambling to find signals in the chaotic messaging from the president's administration.
Put simply, there hasn't been a clear timeline for an end to the hostilities.
That also means we don't know how long the markets could fall as the whole situation evolves.
In times of fear like this, demand for "safe haven" investments typically surge.
Heck, just think of gold's move last year amid all the worries over inflation and economic policies...
He predicted that the Federal Reserve cutting interest rates would fuel fears of inflation – and send the price of gold higher.
And that's exactly what happened.
The Fed announced a rate cut on December 10. And the spot price of gold soared by about 8% in the following weeks.
Now, there was a minor pullback immediately after that growth. But from that pullback in late December, gold prices surged by roughly 23% until late January.
However, gold has been under heavy pressure amid the recent turmoil in the Middle East. The precious metal's spot price is about 17% below its peak from earlier this year.
With a fall like that and considering the fearful climate, some investors might see this as a chance to "buy the dip" in gold.
Wall Street legend Marc Chaikin accurately predicted the crashes in 2020 and 2022. Now, on March 25, he's stepping forward with an urgent update and timeline on the next bear market. He'll show you exactly what's coming... and tell you the EXACT DAY to move your money to prepare for a period of extreme pain, uncertainty, and loss. Learn more here.
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Beware of Rushing to Buy Gold's Recent Dip
As regular readers know, the Power Gauge doesn't track the price of gold itself.
We track the metal's performance through the SPDR Gold Shares (GLD) instead. It's the largest physically backed gold exchange-traded fund ("ETF") in the world.
An interesting pattern emerges when we look at a key technical indicator, however...
I'm talking about a "Keltner channel."
It's made up of three lines. The middle line is an "exponential moving average." And the top and bottom lines are based on another technical indicator – "average true range."
The math behind it all is a bit complex. But the main thing to know is that a Keltner channel is a trend-following indicator.
If the price of a stock or ETF closes above the top line (the "upper band"), it tends to be interpreted as a good sign. The opposite is true if the price closes below the bottom line (the "bottom band").
Over the past six months, GLD showed three notable surges above that top line...
The first spike was last October, due to a renewed trade war with China. The second came after the Fed cut rates in December. And the third happened as the geopolitical drama over Greenland played out...
Each time, a surge above the top band of the Keltner channel triggered a pullback. "Bullish" investors bought the dip and pushed the ETF back up.
But more recently, something else happened...
This past Thursday, GLD fell below the bottom band. This signals that we could see even more downside ahead.
The chart below shows the story over the past six months...
As I said, gold is down about 17% from its peak this year. That's a steep drop.
To make matters worse, GLD has also just dipped below its long-term trend line. You can see that in the chart as well.
But in the short term, a key technical indicator shows that the metal could be a major trap at current levels.
Good investing,
Ethan Goldman Editor's note: As we've discussed, we're in a time of heightened uncertainty and fear in the markets. And that's why our founder Marc Chaikin is stepping forward with an important warning for investors...
He's going on camera tomorrow, March 25, to explain the dramatic shift unfolding in the markets today. However, he'll also share how this is opening up an extraordinary moneymaking opportunity for investors who understand what's coming – and how to prepare.
— According to the Chaikin Power Bar, Large Cap stocks are more Bearish than Small Cap stocks. Major indexes remain all bearish.
* * * *
Sector Tracker
Sector movement over the last 5 days
Energy
+2.99%
Financial
-0.06%
Information Technology
-1.32%
Industrials
-1.81%
Discretionary
-1.85%
Communication
-2.27%
Materials
-3.74%
Health Care
-4.13%
Staples
-4.47%
Real Estate
-4.60%
Utilities
-5.25%
* * * *
Industry Focus
Homebuilders
0
11
24
Over the past 6 months, the Homebuilders subsector (XHB) has underperformed the S&P 500 by 9.53%. Its Power Bar ratio which measures future potential is Very Weak, with more Bearish than Bullish stocks. It is currently ranked #21 of 21 subsectors.
Indicative Stocks
BLD
TopBuild Corp.
BZH
Beazer Homes USA, Inc.
CARR
Carrier Global Corporation
* * * *
Top Movers
Gainers
ALB
+6.93%
SW
+6.88%
Q
+6.81%
PLTR
+6.74%
CVNA
+6.51%
Losers
EL
-7.72%
FICO
-5.70%
CNC
-4.62%
MU
-4.39%
EXPD
-3.97%
* * * *
Earnings Report
No significant Earnings Surprises in the Russell 3000.
* * * *
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