Tired yet? Tired of the market swings? Tired of losing money? Unless something very positive develops over the next few weeks, your quarterly statement is not going to look very pretty.
I would ask those of you who are not yet subscribers to GaneWisdom/Market Edge, to check out our post for the week of February 20th, 2023. Specifically the Market Alert issued on February 23rd :
Thursday February 23rd, 2023
We are issuing a SELL order for the following:
Small Cap Funds
S&P 500 Funds
Transfer money into CASH (Money Market) before the end of trading on February 23rd 2023.”
Our subscribers were encouraged to transfer their money into Money Market Funds and saved 3.7% by doing so! This meant that an account worth $15,000 on February 23rd would be valued at $14,445 on 3/10/23, a loss of $555.00! IN TWO WEEKS!!!
And it ain’t over!
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By now you’ve probably heard that the 16th largest bank in the US collapsed this week. On Friday the folks from the FDIC (Federal Deposit Insurance Corporation) showed up at Silicon Valley Bank (SVB) and locked the doors. By the end of business Thursday, depositors at the bank had withdrawn a whopping $42 BILLION!! And these withdrawals were done over just 24 hours! Trading on the bank’s stock was halted Friday morning. Although the FDIC insures to $250,000 per account, 95% of depositor’s money there is uninsured, however Treasury Secretary Janet Yellen assured depositors on Sunday that their deposits are safe. This is the worst bank failure since 2008 as well as the second largest bank failure in US history (behind Washington Mutual, Seattle, Washington in 2008). Sadly, there are many banks in the same boat. Two cases in point: On Sunday the FDIC proceeded to board-up Signature Bank in New York City. This past Wednesday the Feds turned out the lights at Silvergate Bank in San Diego.
Before you blow off the idea that SVB is not relevant to you or me, please keep in mind that banks are where we keep our money. If this sector becomes compromised our whole economy becomes a nightmare. It is important that you continue to monitor the fallout of this serious situation.
Last week saw a two-day stock market rally, however the party ended by weeks end. For the week the S&P 500 lost 4.55%. That is BIG.
Federal Reserve Chairman Jerome Powell spoke before the Senate Banking Committee Tuesday. He let them, as well as Wall Street, know that not only are rates going to go up, but may very well be done so “aggressively.” This idea just somehow was not being seriously considered by investors, so they ran for the door. The next meeting of the Federal Reserve is scheduled for March 22.nd. Wall Street had built in another ¼ % rate hike, however Fed officials have begun indicating that a return to ½ % rate hike may be likely. We’ve been of the opinion, based on our in-depth analysis, that just this scenario would be playing out (as our past posts for many months will confirm) however it’s never popular to be a realist.
As you’ve read on our Instagram (marketwatch.ganewisdom) and Face Book (Market Watch:Gane Wisdom) posts this week, the S&P 500 broke the support level on both the 50-day moving average as well as the 200-day moving average. This is an indicator that, at least for the moment, an upward trend has been halted. As you’ve read here over the last few weeks, we’ve been concerned that the technical indicators we track have been all over the map. We called it ‘sailing in uncharted waters.’ Although over the past weeks we wrote that ‘Should the S&P 500 close above 4,300 we will project an end to the Bear Market’ the reason being that he S&P was showing SO MUCH strength, we must now view this dramatic downtrend reversal as something much more ominous.
Let’s look at the numbers at the close of this week:
S&P 500 – down 56.73 pts at 3,861, -1.45%
Dow Jones – down 345.22 pts at 31,909, -1.07%
Nasdaq Composite – down 199.47 pts at 11,138, -1.76%
Russell 2000 (Small Cap Stocks) – down 53.88 pts at 1,772, -2.95%
The NASDAQ 100 index also broke below its 50-day and 200-day moving averages and was down 3.75%
As we’ve been reporting, consumers are continuing to rely on credit cards to pay expenses and according to the latest quarterly report by TransUnion at the end of 2022 credit card debt stood at a record $930.6 billion! Up 18.5% from the end of 2021. This data is not a good omen.
Current Fixed-rate 30-year mortgages stand at 7.16% nationally.
You’ll recall our talking about good news being bad news? Well, the good news this week was that 311,000 new jobs were created in February! The bad news however was that 311,000 new jobs were created in February! Unfortunately, the Federal Reserve looks at the fact that the more jobs that are created, the greater the opportunity for inflation to rise (or remain where it is currently), hence the hawkish view by the Fed toward an increase in interest rate hikes. Of course, there are more indicators that the government uses when they view inflation numbers, but employment is a major one of them. The market had forecast 205,000 jobs being created in February so you can see where the panic is derived.
You will recall that we used a long-ago quote from the-then Federal Reserve Chairman Alan Greenspan who felt that the markets back in the late 90s were experiencing “Irrational Exuberance”, to equate the ‘euphoria’ Wall Street was feeling in November and December. Even the first few weeks of 2023. The upturn of the stock market was mainly due to ‘assumptions’ that the days of aggressive interest rate hikes were a thing of the past. We all know what ‘assuming’ does, but it is now beyond doubt since Jerome Powell pulled the curtain back.
Should you, or someone you love, be invested in the market – a 401k, 403b, IRA, ROTH IRA, mutual funds, or variable annuities – it would be in your, or their, best interest to have a support system in place to help you or them manage your or their own money. Most financial advisors do not give guidance on many of the plans listed above. There are companies that offer assistance to investors but unfortunately many of these firms demand a minimum balance of $500,000 (plus charge a management fee) to manage your account. GaneWisdom/Market Edge charges $200.00 PER YEAR.
For many months we have looked for a Panic Bottom – where investors just have had enough and throw in the towel – but with the early year rally we had to be prepared to call an end to the Bear Market if the S&P 500 rose to, and closed at or above, 4,300. Frankly this is now not looking likely, mainly due to the news coming out of Washington and the affect that news is having on Wall Street. The number we see a Panic Bottom in the S&P 500 is in the neighborhood of 3,300 +/-. Or a loss of another 17%. A Panic Bottom would signal the end of the current Bear Market and therefore a genuine buying opportunity.
Panic Bottoms are gut-wrenching affairs however and for the first time in many months we are seeing the investing pubic begin to smell blood. The CBOE Volatility Index (VIX), also known as ‘The Fear Index” and another of the many indicators we follow, is an indicator of investor confidence (or lack of) and is now moving in the direction of fear. Bottom line – the stars and moon just may be lining up to form a major downward pattern. The coming days will signal if indeed this is happening. Watch for our observations on FB and IG.
This week’s Market Update is by far the most extensive to date, however we are now heading toward some potentially dangerous shoals ahead and our mission to our subscribers is one of keeping them informed in order to navigate properly. Because of the ongoing possibility of further market turmoil, we made this (very lengthy) report available free of charge to non-subscribers.
Our analysis is based upon an extensive array of market indicators, trading trends, historical data, market sentiment, fundamental charting, technical analysis, and much more. The methods used at GaneWisdom/Market Edge DO NOT include emotional bias, however. We rely instead on our foundational strategies when offering market outlooks and projections.
The seizure of Silicon Valley Bank is sending serious aftershocks throughout the financial industry this weekend, not only here in the US but world-wide. Over the past year not only has the Federal Reserve commenced the most aggressive interest rate hikes since the early 1980s, but we have seen the largest selloff in technology shares since the dot-com bubble at the turn of the millennium. Cryptocurrency is experiencing what many analysts consider a collapse. Real Estate funds are currently going through a ‘run’ (exists) and the SVB collapse is sparking more widespread withdrawals throughout the banking system. And lest we forget – two other bank failures in the last seven days. Keep in mind that Wall Street does NOT like uncertainty, and I leave it to your common sense as to what we are now witnessing.
Although the current news may seem scary, never forget that there will come a time of opportunity once more. By following our analysis here on GaneWisdom/Market Edge you may be able to avoid big losses through the ‘buy and hold’ strategies advised by traditional financial gurus and instead of making up losses, you could possibly be making money.
Our positions are unchanged from the previous 2 weeks –
Stay in or transfer into CASH (Money Market Funds). We will offer Mid-Week Alerts as necessary.
There is a thought circulating that the Federal Reserve may decide not to raise interest rates at it’s next meeting on March 22nd, 2023. This idea, currently being floated, is due to the collapse of Silicon Valley Bank and the Street’s hope that not raising interest rates now will have a calming effect on the banking sector and the stock market as a whole.
This assumption – which may or may not materialize – only serves to offer hope to a market that has been reeling. Whether the Federal Reserve raises interest rates next Wednesday or not does not negate the Feds stated goal of reducing inflation (which currently stands at 6.4%) to 2%. We can then expect further rate hikes in the near term to force the inflation rate down, which likely will cause future market angst.
Today, the Consumer Price Index will be announced. The CPI is a measure of the average change of prices for consumer goods and services which indicates the monthly rate of inflation. If indeed the Fed decides to forgo a rate hike in March, it is unlikely that rate hikes are at an end.
Therefore – the turmoil we’ve witnessed on Wall Street has yet to come to an end. A brief respite in uncontrolled market fluctuation may be at hand, however our position remains the same:
Stay in or transfer to CASH (Money Market Funds)
As you likely know, the banking sector is causing headaches across the US markets and global ones as well.
Credit Suisse Group which has had a tumultuous few day has been granted a reprieve somewhat as Switzerland’s Central Bank has agreed to loan approximately $54 billion to them. Earlier it was announced that the Saudi National Bank would not provide further financial help to the bank. The Saudi bank provided 4 Billion to Credit Suisse a year ago.
The banking sector is becoming synonymous with the little Dutch boy putting his finger in the dike to prevent the sea from rushing in.
The KBW Bank Index which measure the US banking system, fell more than 3% yesterday (Wednesday). First Republic Bank’s shares declined over 70% in the last week alone.
Many regional banks are feeling the effect of this latest downturn in the banking sector. We’ll have more to say about this on our Facebook page (Market Watch:Gane Wisdom) as well as our Instagram page (marketwatch.ganewsidom).
Although these past few days have been a reflection of the ongoing concern over the banking sector, we need to be reminded that this market has been reflecting the Fed’s concern over Inflation and the Fed’s remedy to address it. This banking problem is another headache that investors just did not need now.