Technical Analyst, Saxo Bank
Summary: SVB Financials difficulties spreading to rest of banking sector in Europe and US. European Banking Sector seems to form top and reversal patterns whereas US Banking Sector taking out or testing key supports. SVB share price indicated open below 2016 level
The Europe Stoxx 600 Banks sector has been hard hit this morning after bad news and heavy selling in US banks last night. The uptrend has been weakening past few weeks as indicated by the Divergence on RSI.
The Lyxor Europe Stoxx 600 Banks ETF opened more than 5% down at the key support at around 22.75 and the 55 daily Moving average. At the time of writing buyers are lifting the Sector EFT from the support.
If the Europe Stoxx 600 Banks ETF closes below 22.75 and RSI closes below 40 threshold downtrend is confirmed with a move down to support and 0.382 retracement at around 21.72-21.52 to be the likely scenario.
To get Europe Stoxx 600 Banks ETF back to bullish trend minimum requirement is a close of the gap this morning.
On weekly chart the ETF has formed a potential Bearish Engulfing top and reversal candle (unless it closes above 23.84 today Friday) testing lower steep rising trendline . A close below could pave the way for a downtrend to strong support area around 20.26-19.58. 19.58 is also the 0.618 retracement of the uptrend.
To demolish and reverse the top and reversal scenario a close above 24.60 is needed. First singal of this to play out would be a close of the gap created with the opening this morning
The SPDR S&P Regional Banking ETF (KRE) was hard hist yesterday following the news in SVB Financial. SVB was the largest holding in the ETF.
The Regional Banking ETF has broken below key support at 56 thus breaking bearish out of a medium-term Descending triangle like pattern – see weekly chart. The downside potential, given that KRE closes the week below 56, is between 42 and 33 i.e., the Consolidation area from 2020. Illustrated by the vertical arrows.
RSI is currently below 40 supporting the negative outlook for KRE.
To reverse the bearish picture a close above 62.55 is needed.
The SPDR S&P Banking ETF (KBE) closed bang on the key support at 42.60. Otherwise the technical picture is identical to the Regional Banking ETF KRE.
RSI is below 40 i.e., in negative sentiment supporting the bearish outlook where KBE is likely to trade lower. Strong support at around 35.
To reverse the bearish picture a close above 50.82 is needed.
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Markets are driven by election optimism, overshadowing growing debt and liquidity concerns. The 2024 elections loom large, but economic fundamentals and debt issues warrant cautious investment.
As US economic slowdown hints at a shift away from exceptionalism, USD faces downside with looming Fed cuts. AUD and NZD set to outperform as their rate cuts lag. JPY gains on carry unwind bets and BOJ pivot.
Amid AI and obesity drug excitement, equities see varied prospects: neutral on overvalued US stocks, negative on Japan due to JPY risks, positive on Europe. European defence stocks gain appeal.
With the economic slowdown, quality assets will gain favour, especially sovereign bonds up to 5 years. Central banks' potential rate cuts in Q2 suggest extending duration, despite policy and inflation concerns.
Commodities poised for rebound. The "Year of the Metal" boosts gold and silver, copper awaits rate cuts. Grains may recover, natural gas stabilises. Gold targets $2,300-$2,500/oz, copper's breakout could signal growth.