SPY
Charts done on five minute and daily candles. Stocks got rocked last week after the collapse of Silicone Valley Bank, the 16th largest bank in the United States. Silvergate Capital was also forced to close down its banking division just prior to SVB last week. The fall of these two banks sent shockwaves that had a sense of déjà vu, many remembering the Washington Mutual downfall from 2008. The pains these giant institutions are seeing come from the monetary tightening cycle our economy is going through. Historically every time The Federal Reserve raises rates, that’s when those who are over-leveraged or lack liquidity fall victims to the shifting policy. The magnitude of this downfall is likely only starting to be felt, we’ll see many tech start-ups and large companies who banked with SVB suffer either a loss or close down for good.
The bank story will be headline grabbing all week, but it’s not the only event to watch. Markets are expecting key economic updates such as the CPI report, February retail sales, and consumer sentiment. The biggest focus will be the CPI report since it will give us a new reading on inflation. Last month’s report showed a slight uptick in inflation for the first time in three months, so if we see that trend again then it will almost guarantee The Fed will be forced to raise rates by 50 BPS instead of 25 BPS, which will only bring more economic hardship companies and consumers.
Technical analysis:
Friday’s volume was the strongest recorded volume since January 2022. SPY’s decline led it to a low of 384.30 before seeing a slight bounce so that’s our first support in focus this week, if we move below it then 382.60 in the next support in place. It’ll be difficult for buyers to gain confidence this week with all the panic around banks, but if buyers do come in then they need a move above 393.80 to move into a bullish pivot zone.