After FED news market come neutral and US dollar drop, what is next?

04.05.2023

Dear traders,

The FEDs have increased interest rates by 0.25%, and with Powell’s words, the market expects a slowdown in rate increases next month.

BTC is holding at mid-28k and has now pumped up to resistance at 29,200$. For future continuation, it needs to break the 29,200$ resistance to enter the 30k range. On the 4-hour chart, BTC’s break-up is targeted at 32k and downtrend to 25k, and that swing will come soon.

ETH has broken up from the 1850$ support zone to the 1920$ resistance. It still needs to break the big resistance before the next pump-up. If bad news comes on the market, it could drop to 1700$. Take care of your trades, the market is still neutral.

XRP is still consolidating at the 0.46$ support, and a bigger push is needed for a break-up to 0.5$. The lower target is still 0.4$, and the market is still neutral.

LINK has broken above 7$ and hit the 7.2$ resistance, which needs to break to make a more bullish push-up. However, it remains a good long-term buy.

SOL made a false breakout to the 21$ zone and pushed back to the 22$ trading channel range. It is still a good option for a small short position.

DXY has dropped hard to the 101 support and is now trying to push up harder. It still does not look good for the next push-up.

Crypto/stock daily news:

THE REGIONAL BANK BLOODBATH

It was Tuesday.

JP Morgan had just bought First Republic Bank the day before. Everyone thought the banking crisis was over (phew.) I had Taco Bell for lunch to celebrate – diet be d*mned.

But then came a funny sound…the sound of regional bank stocks sinking faster than the Titanic.

PacWest: -30%
Western Alliance: -16%
Metropolitan Bank: -25%
HomeStreet: -17%
Zions Bank: -24%
KeyCorp: -10%

(These are mid-sized banks, like Silicon Valley Bank and FRB.)

It got so bad that stock trading for PacWest and Western Alliance was halted. You know sh*ts bad when the ref calls a timeout to stop the pain.

The regional bank ETF hit its lowest price since late 2020. I haven’t seen this much red since Fun Dip would stain my fingers when I was 11…

Pic:bank

So, what’s going on? 3 things:

1/ Regional banks are seeing fewer deposits

It all started when Silicon Valley Bank collapsed in March. It sent shockwaves across the industry and that’s when spooked customers started taking their money to:

A) Banks they thought were too big to fail or

B) Money market funds with higher yields (Milky Fact of the Day: Apple’s new high-yield savings account saw $1B in deposits over its first 4 days)

PacWest lost 17%, Western Alliance 11%, & FRB 41%. A smaller subset of large banks (JP Morgan, BoA, Citibank, etc.) gained deposits.

2/ Short sellers are targeting weak banks to make some money.

Imagine you’re playing a pickleball match, and every time you lose a point, a whole bunch of people place a bet against you. So they cheer for you to lose, not win, to get their money.

That’s what investors have been doing to regional bank stocks. They shorted SVB’s, FRB’s, & now others they think are on the chopping block.

3/ Regional banks would be hit hardest by regulation.

The U.S. has been thinking about new rules to avoid risk/situations like SVB’s bank run.

The rules would apply to banks with $100B to $250B in assets that are funded mostly by customer deposits. Increased liquidity/capital requirements could make things difficult for them.

So… what now? This is just how far their stocks have dipped so far.

They will keep slipping now when central bank raises interest rates the expected 25 points.

Why? Because high interest rates aren’t good for mid-sized banks. They make it more expensive for them to hang on to their deposits. Plus, they lower the market value of long-term bonds/loans.

That’s part of why SVB went under. Its long-term Treasuries/mortgage-backed securities sank in value because they’re only good if interest rates stay low (spoiler alert: they haven’t.)

And yall know hikes aren’t good for crypto either – they make people less likely to spend money on risky assets.

Get ready for a red week across the board.