On Friday morning, before the market opened, trading was halted for SVB Financial Group (SIVB).
Shortly after the opening bell, news spread like wildfire. The FDIC took over the bank, and its existence ceased—effective immediately.
The failure is complex. The blame goes to a combination of internal choices…
- Clients serviced
- Assets purchased
- A very visible $2.5 billion loss
And external forces…
- Rising interest rates
- A run on the bank
And in the aftermath…
The market sold off. For two days in a row.
To understand this, you must remember—markets hate uncertainty. And now the market is facing many questions…
- Is my Money safe?
- Will Washington institute new regulations?
- Is SVB an isolated situation, or could other banks fail?
With those questions weighing heavy on the market, Friday was a bearish day. The indexes all fell sharply…
- Dow Jones -1.1%
- Nasdaq -1.8%
- S&P 500 -1.4%
- Russell 2000 -2.9%
At this point, no one knows how bad things will get.
On Sunday afternoon, regulators closed Signature Bank (SBNY).
First Republic Bank (FRC), a regional bank in California, is under pressure this morning.
Sector Round Up
All 11 sectors ended lower on Friday for a second day.
At the top…
- Consumer Staples (XLP) -0.5%
- Healthcare (XLV) -0.8%
- Consumer Discretionary (XLY) -1.0%
At the bottom…
- Industrials (XLI) -1.9%
- Materials (XLB) -2.3%
- Real Estate (XLRE) 3.2%
So-called “stablecoin” USD Coin lost its peg to the US Dollar over the weekend.
Exposure to SVB was a contributing cause.
This morning Bitcoin^ is trading near $22,300. It’s risen about 10% over the past 24 hours in the wake of a second bank failure.
It’s down about 10% from its mid-Feburary peak.
Since we believe the sentiment has turned completely bearish, we want to know the downside potential.
The chart above tells a distinct story.
Over the past 20 years, when the number of stock trading below their 200-day moving average falls below 20%, that usually indicates markets are oversold, and a bounce is virtually inevitable.
We’ve got a ways to go.
Conditions are ripe for a selloff…
- The VIX closed above a critical resistance level for a second day, and it’s still got a lot of room to run.
- RSI levels are all neutral
- The Put-to-Call Ratio is oversold
It’s inflation reporting week.
If there is any hope of a Fed pivot, it will come from these reports…
- Tuesday—Consumer Price Index (CPI)
- Wednesday—Producers Price Index (PPI)
A few of the earnings we’ll have an eye on this week.
- Monday Getty Images (GETY) after hours
- Tuesday Guess (GES) after hours
- Wednesday Toughbuilt (TBLT) after hours
- Thursday Blue Apron (APRN) premarket
- Thursday FedEx (FDX^) after hours
Another bearish sign … Our watchlist is shrinking.
*BLPH on watch
*AMAM support at $8
*CING support at $1.80
*UNCY on watch
*RRGB support at $11
PTGX on watch
DKS support at $140
DTC support at $5
SQSP support at $25
IOT on watch
RELY support at $15
ARDX support at $3.50
GOTU support at $4.50
BGCP support at $4.50
For those seeking a vehicle for bearish bets, consider the following ETFs:
SDS – ProShares UltraShort S&P500, -2x
QID – ProShares UltraShort QQQ (Nasdaq 100), -2x
SPXU – Ultrapro Short S&P500, -3x
SQQQ – Ultrapro Short QQQ, -3x