The regional and now European banking crisis remains fresh on investors' minds. But investors aren't the only ones rattled by what's happening in the banking system.
One week ago, I wrote about how the CME Group's FedWatch Tool painted a clear picture of where the Federal Reserve was headed with interest rates later this month, and that was a 50- basis-point hike, taking rates from 4.50%-4.75% to 5.00%-5.25%. We also heard what the Fed chairman told Congress on March 7 and March 8 -- interest rates are headed higher for longer.
Fast forward a few days and the Fed's next move on interest rates is a literal coin toss. Only this time, we're not debating between a hike of 25 basis points or 50. We're talking about no rate hike at all versus a 25-basis-point hike. At this point, we need to decide whether a Fed decision not to hike rates indicates that our policymakers know they broke something and are scared about inflicting more near-term damage.
While it's worth noting that traders now expect the Fed to cut rates aggressively toward the end of the year, with a late-January 2024 interest rate range of 3.75%-4.00% favored, I still expect Jerome Powel to move forward with a 25-basis-point hike on March 22.
Regarding the European banking issues, I'm talking about Credit Suisse (CS) . While needing to borrow billions potentially isn't great news, have you looked at a chart of CS lately? The stock hasn't spent more than two days above its 200-day simple moving average since March 2021. This stock is in a long-term downtrend dating back to mid-2007, and I'm not sure why anyone is surprised by the company's consistently poor fundamental outlook based on its multiyear stock performance. Let's label Credit Suisse as another excellent example of bad things that tend to happen beneath the 200-day simple moving average.
On the equity index side of things, I'm pleasantly surprised by the outperformance of tech stocks, pushing the Invesco QQQ Trust (QQQ) to the top of its multiweek downtrend. If stocks such as Advanced Micro Devices (AMD) , Meta Platforms (META) and Broadcom (AVGO) can continue to rally, my guess is the QQQ will retest $310 over the next few days. But as we've seen over the past week, momentum in both directions can shift and vanish in hours.
The iShares Russell 2000 ETF (IWM) is still at the top of my list as a potential rebound trade. While I'm only interested in trading this ETF when it's breaking higher from above its day session's volume-weighted average price (VWAP), I like that buyers continue to materialize above $170.