Today is the day.
For financials, energy, and small caps, it may be the final chance for the bulls. Tuesday's action, driven by additional regional bank failure fears, triggered breakdowns in all the associated index ETFs in those sectors.
Without a recovery either here on Wednesday or early tomorrow morning, it is hard to imagine a scenario where short-term traders want to call a bottom.
For instance, check out the action in the SPDR S&P Regional Banking ETF (KRE) . The ETF hit levels not seen since late 2020. Those "support" levels don't truly exist any longer, so they aren't worth examining.
Yesterday's 6.27% drop sent the ETF below the trading channel from the past seven weeks. Sure, a trader could buy here, but if you do that, where would you place a stop? Honestly, I have no idea. I know I would be selling into the $41 to $42 level if I caught this bottom. There are likely plenty of traders who are long from the last seven weeks that would be happy to get their money back or exit with a small loss.
There's no reason to be a hero here. Either wait for a clearer bottom or a close over $43 if you want to be long. You'll find a similar breakdown with big overhead resistance on the Energy Select Sector SPDR Fund (XLE) as well.
The only attractive-looking action out there on a broad index is precious metals. While I continue to like gold and silver along with lithium over the rest of the year and into 2024, there's no way I'm taking a position into the Federal Open Market Committee (FOMC) meeting. Whether it is precious metals, bonds or equities, establishing a new position into this decision feels like a coin toss. More accurately, the guidance toward the next meeting feels like a coin toss.
Does the Fed worry more about inflation or the potential for more regional banks to fall by the wayside? I can't answer that, and anyone who claims to know is lying.
Turning toward earnings, Starbucks (SBUX) surpassed both revenue and earnings estimates. It didn't just beat the estimate of $0.65 per share, it crushed it, pulling in $0.79 per share. And sales were up across the world, including in China, but guidance failed to excite investors. As a result, the stock traded down to $108 in the after-hours on Tuesday.
This was one of my concerns yesterday, as I noted the recent 15% run-up in April could cause a drop to the 21-day exponential moving average (EMA) if investors weren't wowed by both the results and the guidance. That 21-day EMA happened to be around $108. I'll circle back to this one for another look in a few days, but I want to let earnings and the Fed shake out before considering a trade.