It turns out First Republic Bank (FRC) was more frog than canary the way it croaked on Tuesday. Not only was the SPDR S&P Regional Banking ETF (KRE) not immune, but neither was the entire market.
The reactions we saw yesterday to even strong earnings were disheartening. We saw several high-profile green-to-red moves where the stock opened higher and turned lower early in the session. With the broader market weak, many stocks closed at their lows of the day.
Here on Wednesday, all eyes will be on the big names I mentioned at the start of the week: Microsoft (MSFT) , Alphabet (GOOGL) , Visa (V) and Chipotle Mexican Grill (CMG) . All four of them enjoyed an immediate pop after hours on Tuesday. Now we must sweat out the morning session, both pre-market and the first half of trading on the day.
All the major indexes have lost support. The Invesco QQQ Trust (QQQ) experienced its first close under the 21-day exponential moving average (EMA) since early March. The bulls need to recapture $315 quickly. Bullish follow-through from GOOGL and MSFT today could help that happen. Unfortunately, the 50-day EMA sits only $2.50 below yesterday's close.
In other words, the bulls don't have a lot of comfort here in terms of how hot they can let this fire get before it spreads everywhere.
Rather than outlining the SPDR S&P 500 ETF (SPY) , I'll just tell you to read the QQQ analysis instead because they are essentially the same.
The iShares Russell 2000 ETF (IWM) has put itself back into purgatory in terms of any bullish views. It's simply not happening. The big names are going to carry us back into bullish territory here if it is going to happen. We won't be led by the smaller names.
Ironically, and speaking of big names, the Financial Select Sector SPDR Fund (XLF) doesn't look terrible in comparison to KRE. Don't get me wrong. Traders won't be throwing it a parade any time soon, but a simple bounce back above $33 keeps this ETF in play for the bulls.
I'll end with energy. The Energy Select Sector SPDR Fund (XLE) is sitting right above its 50-day EMA and right below the 21-day EMA. The late March gap is just about filled, but if bulls don't step in this week it could be a quick 5%-plus to the downside under $83. If the ETF regains $85.75, then it's time to consider an upside trade. As much as I like energy long term, I would be very cautious anticipating a bounce here.
Overall, the markets need a strong recovery today, and they were granted strong earnings after hours yesterday to do so. Then again, we had strong earnings on Tuesday morning and look where that got us.