Bank failure rocks investor sentiment

The day started with the February jobs report. The 311k new jobs added was higher than the 225k expected. Not good news for the Fed… but, hourly wages only rose 0.2% versus the 0.4% expected. It was 4.6% versus 4.8% year over year. The unemployment rate rose to 3.6% from 3.4%. Some good news on the wage front. All said it was lost in the news around SIVB bank failure. Stocks did push higher at the open, but then gave way to selling on the FDIC takeover of the bank. KBE was down 1.8% adding to the declines from Thursday. We could dig further into our conspiracy theory about the Fed engineering a market crash so we can put a halt to inflation through the market versus interest rates. What better way to do that than create a financial crisis so to speak? Biden wants a $1 trillion increase in spending through taxing everyone in the middle to upper class… not received well by Wall Street, by the way. Add all the conspiracies together and you find threads of the market correction being engineered. The market traded lower on all the news and speculation. The ten-year however, was lower as bonds ticked up as a safe haven for cash. The volatility index bounced up 24.8% on the day showing a significant rise on the news. The VIX hit 29 intraday… levels not seen since October lows. We saw money flow drop to 38.3 on the S&P 500 index which also closed below support at 3930 to close at 3861. The NASDAQ fell below 11,474 a key support level to close at 11,138. How this unfolds going forward will be of interest as we manage our positions accordingly. No matter what our beliefs the chart is the ultimate decision maker.

Plenty of questions about the current market environment. The VIX closed at 24.8 moving higher on the uncertainty with banks, inflation, and taxes. The S&P 500 index closed down 1.4% for the day. The NASDAQ was down 1.7%. Small Caps (Russell 2000) were down 2.8%. A shift in momentum put plenty of question marks relative to the direction. The ten-year treasury yield closed at 3.69% down 23 bps for the day with plenty of intraday volatility. Bonds have been pricing in the Fed and future rate hikes but got a boost from flight to safety on Thursday and Friday. Watching how this storyline unfolds. Crude (USO) was up 1.3% and losing direction. Gasoline (UGA) was up 1.5% following crude. Natural gas (UNG) was down 2.4% with inventories rising in the last two weeks. The dollar was down 0.6% as the shift in risk sentiment shifted. We are focused on managing the risk and watching how this all unfolds. The negative sentiment shifted for stocks as investors focus on the Fed and new banking fears.

Charts to Watch:

FRIDAY THOUGHTS: The majority of investors were looking to the Friday jobs report as the next important data following Mr. Powell’s congressional testimony about the economy, inflation, and rate hikes coming. The jobless claims Thursday were higher (should have been good news), and continuing claims were higher (should have been good news from bad news for the Fed outlook). The jobs report Friday showed hope but failed to excite investors. The banking scares hit the headlines and the banking sector dropped more than 6% in two days. The White House released its “budget plan” for the fiscal year… really it was a taxation and increased spending proposal. Shouldn’t pass through the GOP-controlled Congress… but with their lack of direction and integrity who knows. A new Russian offensive is rumored as they have one Ukrainian city already circled and ready to fall under Russian control… this is important news as it relates to the US involvement and its allies. The last two issues are important to the markets moving forward, but it was the banking issues that turned the markets lower… Thus, we turn to the new week for direction overall. Watching to see which part of the news headlines drives investors along with any opportunities.

Previous Charts of Interest Still in Play: LSCC (testing uptrend). Added upside move. DHT (J-Hook pattern). Added to the upside move. BDRY (bottom reversal) remains bullish. Gapped higher and raised stop. STLD (trading range) Added upside move. MSFT (broke support, puts) Added. SOXX (upside follow-through) Added. AAPL (reversal confirmed) Added. TSLA (185 puts on break of support). Added. XRT (Apr 06 65 put). Added. TMF (interest rates reversal on fear). Added. TZA (IWM broke support from consolidation pattern). Added. SPXS (SPY broke support). Added.

Stops Hit: RUN

Quote of the Day: “Thirty-five is when you finally get your head together and your body starts falling apart.” – Caryn Leschen

The S&P 500 index closed down 56.7 points to 3861 the index was down 1.45% with the above-average volume on the selling. Markets reacting to the news as bank failure take center stage. None of the eleven sectors closed higher on the day with consumer staples as the leader down 0.5%. The worst performer of the day was REITs down 3.3%. The VIX index closed at 24.8 as anxiety moves higher on all the headlines. The bounce is over and the downside is in play… watching how it unfolds next week.

Sector Rotation and the S&P 500 Index:

XLB – Basic Materials Moved to the 200 DMA. Support at $77.25. The sector was down 7.6% for the week.

XLU – Utilities remain in the down-trending channel… moved to the bottom end of the channel. The sector was down 2.7% for the week.

IYZ – Telecom broke the head and shoulder pattern on the chart to the downside… broke below the trendline off the October lows… broke $22.35 support. The sector was down 4.1% for the week.

XLP – Consumer Staples downtrend from the December highs remains in play. The sector was down 1.9% for the week. Downside remains in play.

XLI – Industrials Sideways trend favoring the downside. The sector was down 4.5% for the week. Moved to $99 support.

XLV – Healthcare downtrend in play with a break below the $127.50 mark accelerating the move. Nearing the October lows. The sector was down 3.8% for the week.

XLE – Energy tested support at $82.74 and watching how it unfolds. The sector was down 5.3% for the week. Watching for downside trade if breaks support.

XLK – Technology The sector moved to support at $135.30. Maintaining leadership but struggled of late. The sector was down 3.1% for the week. Watching for direction and opportunity near term.

XLF – Financials not the kind of week anyone expected with the failure of SIVB bank. Downtrend accelerated on the news and watching how this unfolds. The sector was down 8.5% for the week. KBE puts in play.

XLY – Consumer Discretionary rolling top broke to the downside and accelerated. $141.60 level of support broken. The sector was down 5.5% for the week. Downtrend playing out.

IYR – REITs $82.96 support was broken on Friday. The sector was down 7% for the week. The negative influence of interest rates and reports of vacancies in commercial rents are rising. Short-side trade opportunity. SRS entry $17.95.

Trouble is building in commercial office space as the return to the office efforts aren’t working. The headlines are steadily showing the fight between corporations and employees. Amazon is the latest showing 1/2 are willing or want to return to the office for the three days a week proposed. This is impacting commercial property owners as mortgage payments are being delayed more than two months. Banks raised their reserves in January and are likely to increase more in February. With that in mind IYR and REM bounced off the October lows but may retest those lows or beyond based on future defaults. Worth watching the downside risk with SRS.

Summary: The index responded to Fed news all week… throw in SIVB bank collapse and you get selling. The selling continued Friday as the news and talking heads jumped on the storyline with both feet. It was a week of news as markets responded to the JPM storyline. It responded to the jobless report. It responded to Mr. Powell and friends at the Fed. It responded to the tax everyone proposal from the White House… overall a busy week of news and it didn’t settle well with investors. When sentiment and clarity shift the markets will always react good and bad. The charts are a mess for the last two weeks with indecision creating choppiness. 3930 level of support broke on Thursday and accelerated lower on Friday. Interest rates moved down to 3.69% on bank fears. Seven of the sectors have established a short-term downtrend… watching how they respond to the moves lower Friday. We will remain patient for now as investors sort out their collective thoughts about all the news. We continue to manage our positions accordingly. Taking exits as necessary and adding where opportunities arise. Remember two things; first, the trend is your friend, and second, don’t fight the Fed.

(The notes above are posted at the end of each week based on activity from the previous week’s trading. The BOLD/ITALIC comments are the current-day changes worthy of note.)


The NASDAQ index closed down 199.4 points to 11,138 as the index was down 1.76% for the day. The 11,474 support broke and invites more downside… 10,941 next support. Money flow remains below 50 with all the news and speculation creating uncertainty around the markets. Technology and semiconductors are the keys… SOXX held up well in the face of the selling Friday. Watching how this unfolds next few days.

NASDAQ 100 (QQQ) was up 1.4% with the mega caps moving back below $292 support. The sector had a negative bias with 15 of the 100 stocks closing in positive territory for the day. Watching how negative sentiment plays out near term. Entry SQQQ $39.

Semiconductors (SOXX) trend turned down breaking support but held and attempted to move higher again, but failed again. $402.60 is the level to hold near term. The sector was down 3.5% for the week. Looking for clarity in direction but it did hold up well in the face of selling.

Software (IGV) bounced at $276.50 support. Failed Friday to hold the move. The sector was down 5.6% for the week. Watching how it unfolds next week.

AI stocks are heating up as companies race to launch new products amid the ChatGPT AI phenomenon. Here is a list to watch and trade the existing opportunities as they present themselves… NVDA, ANET, GTLB, META, BIDU, SPT, CXM, TIXT, STX, MSFT.

Biotech (IBB) The sector bounced at the 200 DMA and moved above $128.35 but the move failed offering downside trade at $126. The sector was down 6.5% for the week. LABD entry $18.26.

MRNA – Moderna cancer vaccine results could drive the company higher longer term. Despite the tough week for the stock, it is worth keeping on our watch list. Finding support… added small position.

Small-Cap Index (IWM) downtrend accelerated to end the week. The sector was down 8% for the week. Money flow turned negative. Entry TZA $29.20.

Transports (IYT) broke the uptrend line from the October lows but held the 200 DMA. Trying to hold the $224 support level. The sector was down 5% for the week.

BDRY – Dry bulk shipping looking bullish with a bottom reversal in play. Gapped higher – adjusted stop. Movved to the January highs.

The Dollar (UUP) The dollar was choppy all week on the back-and-forth talk about the Fed and interest rates. The dollar was up 0.1% for the week. The outlook shifted on Friday with the jobs report and bank failures… watching next week’s activity.

Treasury Yield 10-Year Bond (TNX) The yield closed the week at 3.69 down from 3.96% last week. Big shift on Friday as the fear from the bank fallout impacts investors’ risk tolerance. TLT was up 3.6% for the week. Entry TLT $102.90.

Crude oil (USO) trading range on the chart with oil headed back towards the bottom end of the range. Economic speculation is impacting supply-demand globally. USO was down 3.9% for the week. The weekly chart shows the downtrend building in crude.

Gold (GLD) The commodity bounced this week as the dollar waffled. The metal was up 0.8% for the week. Held support at $168 and posted a solid reversal. Entry $169.50.

Put/Call ratio was 1.23 Friday… News is in play and fear rising.

Questions to Ponder: Navigating Uncertainty

Retail sector (XRT) is lagging of late… but the White House says the economy is strong. Scanning the stocks shows WMT, TGT, JWN, KSS, M, etc are all slowing of late. Watching how this unfolds moving forward. Short side has played out well.

Speculation/Conspiracy Theory: The Fed is in the position of getting the market to do the dirty work for it. If the market drops 20-30% and crashes liquidity for the average American… they, the average Joe, cut spending out of fear. That allows the Fed to not raise rates above the 6% level by allowing the markets to accomplish the feat while they, in the background, dry up the money supply exacerbating the process. The market would crush inflation and throw the economy into a full-blown recession. Which in turn could and would destroy the middle class. This will all be done for the need to preserve the American way… printing money and raising debt levels while the government gains more control and take more of the freedom our forefathers fought for.

Adding to the speculation about the Fed doing the dirty work, JP Morgan is of the opinion with increased 0DTE options (zero days to expiration) trading daily it could send the market down as much as 25% intraday. Reuters posted an article on the impact on Monday. The daily dollar value is now up to $1 trillion per day. One thing is certain… the markets are never dull.

Adding to the speculation is JP Morgan potential involvement with Epstein… Not sure this isn’t part of the master plan. Take down the markets and create a digital currency to replace the current system all in the name of “protecting” democracy.


Friday: Stocks fell on fear relative to just about everything. Inflation is tops on the list… bank failure didn’t help matters and if it gets worse it will become the top issue. Jobs report out Friday showed some softening in the numbers but not enough to offset the Fed. The speculation train is running full speed with the SIVB banking collapse. The talking heads are piling on with what happens next talk. Friday was the second day of selling as the fear meter rises. Plenty to ponder but managing risk is tops on the list. The flight to safety has my attention as well (TLT)… volatility is up intraday and accelerated on Friday.

Hope is a beautiful thing… but, as we say many times, the data doesn’t matter until it does. That is where we find ourselves currently. We look to the charts to provide the next direction near term… Choppy markets based on the comments the last few weeks by the Fed versus the data reports gave way to selling on bank issues Thursday and Friday. This will play out near term and we will look to see where the opportunities are created. Eyes open. Emotions removed. Interest rates are at 3.69% tanking 30 bps on the shift in sentiment around the banks… flight to safety. It is a time for patience as the storylines unfold and the direction is determined. Sectors were all lower on Friday as worries rise. The money supply has turned lower showing more money on the sidelines (flight to safety?). Don’t assume anything and manage the risk that is. Watch for the volume, direction, sentiment, and volatility levels to lead you to what takes place. There are plenty of moving parts, we have to understand that truth/reality eventually plays out in the markets. Until then we will continue to take what is offered and manage the risk that is.

Our longer-term view is still negative, but nothing goes straight down or up… there are always positive and negative swings in a longer-term trend. Recession talks are trickling back into the headlines. Market correction headlines are growing in numbers. But, we have to remain focused on short-term trades until there is longer-term directional clarity. The charts are showing a short-term trend reversal from the upside. News is in the driver’s seat as we locked in some gains and exited positions with elevated risk. The key remains, know where you are now, know what is happening now, and know what is on the horizon… act accordingly. The goal now is to manage the risk of positions, take what is offered… short or long, and then manage the risk.

“Vision without action is a daydream… Action without vision is a nightmare.” Japanese proverb

The goal of these notes is to allow you, the investor, to learn how to see the market development as the progression through the sector develops based on news, speculation, and data. Data drives long-term results and develops trends… speculation and news are short-term drivers and offer higher risk trading opportunities. Through the use of both technical and fundamental data, we can have greater confidence in our trading strategies with a disciplined approach to investing and managing the risk of our money.

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