Hey, Ross here:
Financial stocks got wrecked yesterday. Check out today’s chart to see just how bad it was.
Chart of the Day
This is the chart for KBW, a bank ETF. See that fat red candle right at the end? It dropped by almost 8% yesterday – dragging the rest of the market down with it.
The main catalyst was Silicon Valley Bank, which saw its stock plunge by 60% as fears of a bank run mounted. SVB had announced an emergency share sale to shore up its finances, noting that its portfolio had taken “significant” losses.
Many banks hold a bond-heavy portfolio that has seen heavy losses as yields rise (bond prices move in the opposite direction as yields). This means they can’t sell these bonds without realizing their losses should customers step up deposit withdrawals.
Couple this with the shuttering of crypto bank Silvergate Capital – and there are fears that a banking crisis could quickly spread.
The good news is that this is nothing like the 2008 Financial Crisis. Many investors had fled to bank stocks in an attempt to benefit from rising interest rates – and they’re now taking a hit.
But for traders like us who follow the trend in individual stocks and move with the market, the situation is far from dire. We just have to be patient.
P.S. Want special trade prospects and potential market moves sent directly to your phone from me? Then just text the word ross to 74121.
Insight of the Day
Sometimes you just gotta be patient – let things play out and see where the chips fall.
Yesterday’s stock market fall wasn’t even that bad if you look at the topline numbers. Yet CNN’s Fear and Greed Index has flipped firmly over to the Fear side of the gauge – from solidly Neutral just a couple days ago. The VIX is also spiking.
In times like these, sometimes it’s best to just let things play out and see where the chips fall. Be patient, study the price action, look for accumulation patterns, and watch for potential breakouts.
Because I promise you that – no matter how doom and gloom the financial headlines might be – there’re always stocks on the verge of breaking out. Likely not in the financial sector (not for a while anyway) but in many others.
Editor, Stock Surge Daily