Weekly Market Outlook (3/20/23)
FOR THE WEEK OF March 20, 2023
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Bull Case: Bulls defended just above the daily demand at 3832.5 but found resistance at the daily supply that starts at 3990. Bulls will need to break above 4022 which will also break over the daily trend line with the next strong supply at 4049.25.
Bear Case: Bears need to continue defending 3990 supply and the daily trend line to continue forming lower highs. If price breaks above 4022 and bears defend at 4049.25 supply, expect a sharp drop back under the trend line.
SUPPORT AND RESISTANCE
Apple Inc. (AAPL)
Tesla Motor Co. (TSLA)
Invesco Trust (QQQ)
Alphabet Inc. (GOOG)
Amazon.com Inc. (AMZN)
S&P 500 ETF (SPY)
EARNINGS RELEASE CALENDAR
FOR WEEK OF March 20
Mar 13 — Mar 19
The Fed’s Response to SVB
The Fed is rolling out of emergency measures to help stabilize the financial system, and to prevent a possible banking crisis. The Fed announced on Sunday that it would be taking steps to “bolster liquidity in key money markets” in order to reduce the risk of a potential banking crisis. The Fed created a new lending program for banks: the Bank Term Funding Program, or BTFP, which will allow banks to take advances from the Fed for up to a year by pledging Treasurys, mortgage-backed bonds and other debt as collateral. By allowing banks to pledge their bonds, they can meet customer withdrawals without having to sell their bonds at a loss, which is what Silicon Valley Bank did last week, sparking a run on the bank. The current economic situation is reminiscent of the 2008 financial crisis, in which banks had difficulty obtaining needed funds, leading to a credit crunch and significant economic uncertainty. The Fed’s actions are intended to “bolster confidence in the financial system” and to ensure that banks are able to access the funds that they need.
Fed Pivots Rate Hike Outlook
Earlier in March, investors were wondering whether the Fed would raise interest rates at its next meeting by 25 bps, as officials did last month, or by 50 bps, as they did in December following a comment by Fed chair Powell about the possibility of a larger increase at the meeting this month amid signs the economy was gaining unexpected momentum. Following the bank failures, investors saw an increasing chance that the Fed would hold rates steady at its meeting next week, not rising rates quite yet. The turmoil in the U.S. banking industry resulted in a rally in government bonds Monday, with yields on some shorter-term Treasurys collapsing half a percentage point in hours. The plunge emphasized how investors have pivoted from worrying about inflation and interest-rate increases to focusing on how problems with banks could damage the economy. Economists are now sending mixed signals as some anticipate just a 25 bps rate rise at the March 21–22 meeting, while others now expect the Fed to hold rates steady in March and resume increases once the current crisis settles down.
UBS Group, the largest Swiss bank, has agreed to buy rival Credit Suisse, the second-largest Swiss bank, for over $2 billion in a deal engineered by Swiss regulators to restore trust in the banking system. This marks one of the most significant moments in the banking world since the 2008 financial crisis. The purchase price is logged at a substantial discount to Credit Suisse’s market value, which closed Friday at around $8 billion. The Swiss National Bank has agreed to offer a $100 billion liquidity line to UBS as part of the deal. Both Credit Suisse and UBS are deemed systemically important in Switzerland and globally meaning that a combination of the two creates a banking giant in Switzerland, one of the world’s largest banking groups, and could potentially lead to a concentration of risk across the banking sector in the future.
Bitcoin Breaks $27,000
Up more than 60% YTD, Bitcoin has surpassed the $27,000 mark for the first time since June 2022. Over the past week, the overall market capitalization of cryptocurrencies increased by more than $215 billion, rising from $918.17 billion to over $1.2 trillion. Bitcoin’s latest rally comes after the collapse of three major banks within the span of just a few days, sending shockwaves through the finance industry. Another contributing factor has been the sudden surge of interest from institutional investors in recent months. According to several crypto analysts, this may be the beginning of a significant multi-month rally, but the likelihood of a significant pullback or sideways consolidation is not ruled out quite yet.
SEC Proposes Classification Of PoS Tokens as Securities
During a Senate Banking Committee hearing last Tuesday, SEC Chairman Gary Gensler suggested that proof-of-stake (POS) tokens should be classified as securities. POS tokens are digital assets that give users the right to receive a portion of any new tokens created by a blockchain platform, incentivizing people to become stakeholders and help promote the network. Gensler claimed that these tokens provide holders with certain rights, such as voting and the ability to earn rewards, and are used to raise money, making them very similar to securities. Gensler suggested that the SEC should work with the industry to create a “functional and effective” regulatory framework for digital assets and stated that crypto companies must comply with the securities laws in place, which the SEC has the authority to enforce.