Another US bank was taken under regulatory care on Sunday. Emergency measures were announced to soothe the fears depositors have over the safety of the deposits in the SVB and the Signature Bank. The Treasury Department, the Federal Reserve and the Federal Deposit Insurance Corp jointly announced they will guarantee all deposits in SVB while guaranteeing that all depositors of the Signature Bank will be made whole. However, the stock and bondholders in the banks are not covered.
Both the Federal Reserve and Treasury said emergency lending would be used to make more funds available for bank withdrawals so that runs on other banks would be prevented. Markets are jittery and don’t quite know what to make of all this. It’s quite clear that risks in the banking sector are always a worry to the economy and investors. If the contagion spreads then all the bullish bets are off.
However, if the Fed shows that they are willing and able to stop the contagion and that they will halt the rate hikes for time being, then we might see a quick turnaround in the markets. All of this is however speculation and, as always, we need to trade what we see and not what we expect to see. Always trade with the momentum as you then are lining yourself with the big money funds that really move the markets. So, keep an eye on newsflow and the price action.
DJ remains bearish below the 32 419 – 32 650 range
DJ remains bearish below the 32 419 – 32 650 range but there’s been more volatility in the two-hour chart compared to the last time the market bounced higher. This volatility increase could be related to the fact that the markets are worried about recent bad news from the US banking sector but it could also signal renewed interest on the long side now that the Fed might not be able to, due to the increased risks in the banking sector, hike the rates as planned.
If the majority of investors believe the Fed will turn less hawkish then we’ll see higher lows in this market. And that would lead to a trend reversal. Tomorrow’s CPI release and the consequent price action probably give us more clues on what institutional investors think. Technically, we need a decisive push above the 32 419 – 32 650 range to reverse the recent downtrend. If this is the case the 32 800 is a likely target one and, if the momentum carries further, we might see 33 400 tested on extension. Alternatively, below 31 800 the market is likely to trade to 31 300.
DAX is bearish below 15 500
DAX is bearish below 15 500. A decisive break below Friday’s low (15 270) would probably push the market to 15 050 or so. Alternatively, a break above the 15 500 level could take the market to 15 670 or so.
UK 100 is bearish below 7772
FTSE is bearish below 7772 and trades near Friday’s lows at the time of writing this. Below 7674 the market could trade to 7630. Alternatively, the market needs to stage a decisive rally above the 7772 threshold level in order to reverse the downtrend. This would open the way to 7830 or so.
USOIL tries to rally
USOIL is technically bullish above 76.17 but the risk here is that the risk-off mentality in equities could spill over to the oil market so only trade the upside if you see the oil market making higher lows in the 30 min chart. Then the bulls are in likely to be in charge otherwise they are losing their grip. But If the upside momentum prevails the market should trade to 78.10 or so. Below the 76.17 level, the market could trade down to 75.50.
The Next Main Risk Events
- GBP Claimant Count Change
- GBP Average Earnings Index 3m/y
- USD CPI and Core CPI
- GBP Annual Budget Release
- USD Core PPI m/m
- USD Core Retail Sales m/m
- USD Empire State Manufacturing Index
- USD PPI m/m
- USD Retail Sales m/m
- NZD GDP q/q
- AUD Employment Change
- AUD Unemployment Rate
- USD Philly Fed Manufacturing Index
- USD Unemployment Claims
- EUR Main Refinancing Rate
- EUR Monetary Policy Statement
- EUR ECB Press Conference
- USD Prelim UoM Consumer Sentiment
- USD Prelim UoM Inflation Expectations
For more information and details see the TIOmarkets economic calendar.
Chief Market Analyst
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