The banking crisis seems to be calming down. FED may potentially pause the interest hikes so as not to cause further damage because for years the FED was telling everybody that the interest rates will stay low for a long time… so buying long-term Treasuries didn’t look like a risky idea. Everybody did it, not just banks. Imagine pension funds, they may be next. And then after 10 years of ultra-low to negative interest yields the FED rockets the rate to 5% within a few months. Of course, no one can sustain such a rapid hike if you suddenly need cash and the 10-year Treasuries which looked like a safe haven are suddenly worthless!
And the market may be now looking forward to some stability. After some bearish start, the index finished green.

Daily Ichimoku charts starting to improve and show some recovery. But still, long time to go to fully recover from the damage. And if the FED screws it up again tomorrow, we may not recover at all and instead head lower.

The weekly Ichimoku chart holds well so far and it is even attempting to break into the cloud. The cloud is strong resistance and we still may bounce down from it. It would be a good signal for the markets if we break into it and above.

The forecasting chart shows a potential down day tomorrow and if the FED doesn’t cooperate it may very well happen. If however, the FED shows a bit dovish stance, the market may continue higher. Note that forecasting is a purely mathematical model based on past data. It may capture the momentum of the trend but may not work well if influenced by sudden news or black swans that disrupt it. There fore the chart below needs to be confirmed. Unfortunately, we do not have that confirmation on any other chart, though there is an improvement that may help push the markets up and invalidate the recent forecasting series.

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What was good yesterday turned sour today. The browny (shit) show continues. This time send your thanks to Credit Suisse… The VIX futures term is turning negative, which means more and more investors are hedging for more selloffs.
The markets sold off hard today. It was down over 1.5% the entire day, and it erased some of the losses by the end of the day but still finished down by 0.70%. Overreaction? Most likely, but that is what we have to endure until spooked investors calm down and start using their brains again.

Daily Ichimoku is still bearish, and there is no sign of any changes coming, so based on the chart below, I expect more volatility and downward pressure.

The daily Ichimoku chart is helplessly bearish with no hope on the horizon. The proverbial light at the end of the tunnel is just another freight train speeding toward us. It is time to become defensive. The weekly chart doesn’t offer much hope, either. It is still bearish, and the market has a hard time breaching the cloud.

The weekly chart started improving at the beginning of the year, but that is gone too. The price is attacking the red-line support. If it breaks, the chart will be more bearish.

For tomorrow, expect more selling and a bearish trend with choppiness.

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All is good…
Inflation went down well, sort of. It went up but at the slowest pace since January 2021…
The government bailed out the crumbling banks…
People got pissed off that the irresponsible managers got away with it again…
The FED may actually start cutting the rates now…
And the pastures are green again…
Until the recession hits us at full speed and strength. Why would it hit us? Because in all cases in the entire 100-year history of the stock market, when the FED starts cutting rates, inflation comes in the next 6 to 18 months… Unless “this time is different.” Which it usually is not.

After some volatility, the markets finished up by a significant number erasing Friday’s losses. But overall, we still have a lot of work to repair the damage the crumbling banking did to the market. There is no sign of change from bearish to bullish in the Ichimoku chart as of yet.

The daily Ichimoku chart is helplessly bearish with no hope on the horizon. The proverbial light at the end of the tunnel is just another freight train speeding toward us. It is time to become defensive. The weekly chart doesn’t offer much hope, either. It is still bearish, and the market has a hard time breaching the cloud.

And the same can be said about the weekly Ichimoku chart – no improvement.

Tomorrow’s prediction is a choppy market, but since the FED appears to be done with hiking the rates, at least for now, and the inflation is down, the market may gain more momentum and recover the losses from last week. Today, the prediction was false, and I have reasons to think that tomorrow’s prediction will be wrong too, and we will see another strong up day.

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Wow, what a week. The FED was playing with fire and broke the toy. Something economists like Warton professor Jeremy Siegel have been warning about since half of 2022, saying that the FED is wrong and tightening too much looking at the wrong data, which will backfire. Fast forward, and the banking system, the very backbone of the US economy, is crumbling. And now, the same morons who recklessly destroyed it are scrambling to fix it. When I was a child, I remember my parents went shopping and asked me if I wanted to go with them. I said no. And when they left, I was crying because they left me at home alone. The FED is like that child I once was.

The VIX structure above is interesting. I have not yet seen a pattern like this. I would interpret it as indecisiveness, confusion, and calm before the storm.

The markets literally crashed. It went from bullish to extremely bearish within two days. The bull trend narrative evaporated. And today was a scrambling day. Volatility went through the roof, and the market was going from bullish to bearish as the news about more banks failing and the government bailing them out hit the markets. Now the FED has what they wished for, except I don’t think they wished exactly for this. Everyone thinks the FED will cut the rates in their next FOMC meeting. And they really may do because despite them telling us that these banks were not significant and it is not a big deal, it can become a big deal very quickly. The companies that had money in these banks may fail to pay salaries to their employees, and they, in turn, may fail to pay their rent and lose their jobs. It can quickly become a domino, precisely like in 2008.

Tomorrow we will receive a CPI report. If the report comes in bad, the FED will be in a precarious position. They will need to raise the rates more, but they can’t unless they want to continue their unscrupulous devastation of the US and world economy.

Nevertheless, the market stopped at its support today after very volatile trading. But in light of the recent problems, it means nothing. We may easily slice below it and create new lows. If CPI comes in bad tomorrow, the market may fall further.

The daily Ichimoku chart is helplessly bearish with no hope on the horizon. The proverbial light at the end of the tunnel is just another freight train speeding toward us. It is time to become defensive. The weekly chart doesn’t offer much hope, either. It is still bearish and the market has a hard time breaching the cloud.

Powell is simply clueless, and he just does what he thinks may be needed at a particular moment in time without knowing what the consequences may be. He is like a doctor who has no clue about his patient’s illness and the potential medicine he may need, so he is just throwing drugs at him and observing which drug may be effective. But in the meantime, the patient dies. This illustrates it perfectly:
 
Jerome Powell testified in front of the banking committee last week.
 
COMMITTEE: “Do you see any systemic risk in the banking system because of the rapid rise of interest rates?”
 
POWELL: “No”
 
SIVB: “Hold my beer.”

Market expectation for tomorrow is negative. But it may not happen. If the CPI indicates easing inflation, the market will rally as it may perceive that the FED can stop the tightening. If it comes in bad, who knows what happens? Expect extreme volatility and stay on the sidelines.
 

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Last week we saw the first cracks in the economy. Two US banks are in trouble. Silvergate and Silicon Valley Banks experienced a bank run. Silver Gate may shut down completely, and SVB is not yet determined. We had a bunch of “experts” coming out telling us what happened. Many are in a panic mode and reporting in a catastrophe tone about the “mini Lehman financial crisis”. And the FED may have a problem.
 

I am not sure what happened with Silvergate bank besides that it was involved in crypto and couldn’t survive the recent crypto meltdown. But the SVB issue is more related to the FED and its aggressive interest hikes. And here we see some potential trouble the FED may be facing soon. They wanted to break something to bring inflation down. And it starts to seem that they broke the financial sector. Exactly the sector they didn’t want to break.
 

Wednesday’s selloff was induced by Powell’s “higher and longer” remarks. Thursday’s selloff was triggered by fears that SVB may start the financial crisis that would lead to the economy-wide credit crunch and recession as we saw many times in the past. The 2008 recession was the exact same problem. The inverted yield curve was signaling since last summer that something could break in the financial system if the FED continues to tighten the monetary policy.
 

The SVB trouble could be the start of the credit crunch and subsequent problems. It may spill into other sectors very quickly, mainly because of the fear of other people and other investors in the market. The FED may choose to ignore it because the SVB bank is too small to bother but the fear of other people is not. And their behavior may spark problems elsewhere. And now the FED may have the crack they wished for. Unfortunately, that is not a crack that would help with inflation. Now, they have to choose between high inflation or a crash in the economy.
 

Continue reading.
 
 

The market started Monday’s session in a strong mode and rallied. Unfortunately, before the end of the day, it lost all gains and finished flat.

The entire three-day rally was not sparked by any news or any changes to underlying fundamentals. If the underlying fundamentals were bad as bears are telling us, they are still bad. If they are good as the bulls hope, they are still good. This trading is purely sentimental driven by emotions and irrational fear. And the wave of bearishness made this bounce inevitable.

As we can see on the daily Ichimoku chart, the price action improved significantly and the price of the index follows the cloud. That is good. It is also going to recapture the red line. If this continues, the case for the bull market will continue with it. This is also improving the weekly chart. We are once again attacking the cloud and soon, we will enter inside. It makes no significance until the market closes above it.

The market traded as expected, except for the closing price action. That sucked. Tomorrow, as we await Powell’s testimony, the market is poised for an uptrend, but it will be a very choppy move. Unless Powell says something unexpected or something the markets will not like, we should go up.

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The futures were dropping, the markets opened lower and continued sliding down on fear (and stupidity), but then at around noon, one unimportant FED member proclaimed that he was in favor of a 0.25 rate increase rather than 0.50 and the markets rallied. Completely worthless news and the markets go crazy about it. This shows you how stupid and irrational investors are today, obsessed with the FED and creeping about nothing. Yesterday, they were all panicking about the higher and longer comments from one unimportant FED member (Waller) and today they are all cheering about a different unimportant FED member saying the exact opposite than yesterday’s clown (Bostic). If one didn’t have his own money in the market this would have been a funny comedy. Right now it is a tragic-comedy.

And so the market recovered all losses and ended in the green. That is good, though, as Bostic’s comments actually worked as a catalyst for the oversold condition and the market bounced where it should have bounced. It recaptured a losing 200-day MA and closed above it as well as above the other support lines. The biggest improvement can be seen in the Ichimoku chart below. Today, we were losing the cloud as the price smashed below it which would be bad. But then we bounced and closed above it. We now need this to hold.

The weekly Ichimoku shows no improvement:

Today, the weakness turned into a strength. We had an initial drop (and should have finished down) but then the markets recovered and rallied. Looking at the volume profile, it indicates that the market is actually trading efficiently. Tomorrow, we may see some choppy trading as bears may try to snap the rally from today’s bulls. We may also gain momentum and rally higher.

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