Weekend Analysis

The clean up of the Banking turmoil from the previous week continued to allow the Markets to maintain the recovery it started three weeks ago. The main development was the US lender First Citizens BancShares stating it would purchase the loans and deposits of Silicon Valley Bank. And after the disastrous intervention last week by Treasury Secretary Janet Yellen, this week it was left to Fed Vice Chair for Supervision, Michael Barr to state that regulators will continue to closely monitor conditions in the banking system and are prepared to use all of the tools for any size institution, as needed, to keep the system safe and sound. 

This start did provide a much welcome boost to the Bank stocks which had sold off sharply in the wake of problems at Silicon Valley and other banks. However, the prospect of stricter regulations for banks with deposits above $100 billion is raising the anxiety level for those that are perceived currently to be struggling. With the quarter end approaching, we should look forward to upcoming bank results, which may give more details about the health of the sector following the collapse of Silicon Valley and Signature Bank. 

Economic data coming out this week was somewhat balanced. On the downside we had the Feb wholesale inventories which unexpectedly rose +0.2% m/m versus expectations of a -0.2% m/m decline. Also, Feb retail inventories rose +0.8% m/m, more than expectations of +0.2% m/m and the largest increase in 6 months. The inventory build should be concern and is considered bearish for stocks since companies may need to cut back on production due to the higher unsold stocks. For those who use fundamentals for their trading may want to consider this as part of their quarterly portfolio review.  Personal spending rose +0.2% m/m, weaker than expectations of +0.3% m/m. 

On the upside, U.S. consumer confidence index unexpectedly rose +0.8 to 104.2 in MAR, stronger than expectations of a decline to 101.0.   FEB PCE core deflator, the Fed's preferred inflation gauge, unexpectedly eased to 4.6% y/y from 4.7% y/y in Jan, the slowest pace of increase in 16 months. Also, FEB personal income rose +0.3% m/m, stronger than expectations of +0.2% m/m. And finally, data showed the Chicago PMI unexpectedly rose +0.2 to 43.8, stronger than expectations of a decline to 43.0. There is a theme developing here, everything good seems to have been unexpected.😂

The Commerce Department confirmed the economy grew at a solid clip in the fourth quarter, but much of the increase in output came from inventory accumulation. Fourth-quarter GDP growth was slightly lower at 2.6% compared with earlier estimates of 2.7%, both supporting the case for a softer Fed policy.

From the consumer angle, weekly data collected by the Fed Reserve showed deposits in small U.S. banks fell -$109 billion, or -1.5% y/y in the week through March 15, the first annual decline since 1986. Whereas according to the EPFR, a global data provider which helps professionals understand when/where money is moving,  showed investors in Q1 poured $508 billion into cash funds, the largest quarterly inflow in 3 years. 

On the Global front, China's manufacturing PMI fell -0.7 to 51.9, stronger than expectations of 51.5. The non-manufacturing PMI unexpectedly rose +1.9 to 58.2, stronger than expectations of a decline to 55.0 and the fastest pace of expansion in more than 11 years. This provided a much needed carryover to the early Friday's rally in Chinese stocks on signs the Chinese economy is recovering. 

All three indexes had a good Green week to move a little away from their respective w50MA. S&P posted its best week since early NOV22 and is now on a 3 week Bull run. S&P has BO and closed back above the RN4k.

Following a strong start to the year in Jan that followed with a bumpy Feb, Mar proved to be a month of recovery that saw all three indexes ending the Q1 in Green. And whilst DoW barely scraped in, both the Nasdaq and S&P posted strong quarterly gains to maintain a strong start to 2023. Following declines for three quarters on the bounce, the S&P has now posted two quarters of consecutive growth and in the process ended Q1 with the largest quarterly points gains since Q4'21. 

Nasdaq has used the bounce from its WVI/50MA support to BO and close above the RN12k, though it is now faced with the dCAT Res which is also the 2023 high. Nasdaq ended the quarter with the largest points gain in a quarter since Q2'20. 

However, as the quarter ends on a strong note especially where Tech and Growth stocks that have had a very strong quarter, we must be cautious as the current risks within the market will inevitably lead to some profit taking. 

The FTSE like its US counterparts managed a strong week and is now under 5% away from its ATH Close. However, for the month of MAR it broke ranks and posted a Bear month to be the outlier. 

We saw a second week of declines for the weekly VIX which ended the quarter well below the RN20 to close back below all its wMA's. Stocks above their DVI's recovered most of its MAR decline, though it remains below the RN50. The GS Growth fund as with the Indexes has recovered well in MAR to post its best quarterly growth since Q4'20 - the fund is now faced with multi Res of RN80/wVI/m50 above.

Cable had its best month since NOV20 moving up over 300pips. On the weekly, the pair is now on a 3 week Bull run.  For trading, the pair offered up 40-70 pips each day for active intraday traders. However, on the long term outlook, this previously noted coward failed at the multi Cat Res to reverse back. For me this pair needs to BO of the RN1.25 with anger and retest for a Long set up with a potential to move 500 pips up to the WVI/RN1.30 combo. 

In the Crypto space, both the Ethereum and Bitcoin had an OK week with the latter now on a 3 week Bull run. However, on the LT for the first quarter Bitcoin gained over 72% with Ethereum lagging with a mere 52% growth. Whilst the Cypto themselves have had a good week, some of the Crypto shares were not so lucky after the Commodity Futures Trading Commission said crypto exchange Binance and its CEO and founder Changpeng Zhao have been sued by the CFTC for operating an "illegal" exchange and a "sham" compliance program. 

For the Sector ETF's we had a clean sweep of Green, a first since mid NOV22. Unusually, the charge was led by a number of sectors, Energy (XLE), Discretionary (XLY), Real Estate (XLRE) and Material (XLB) who all moved up over 5% each. Not suggesting the rest were poor as they all had a good week with the worst performer, Healthcare (XLV) gaining 1.7%, which in recent weeks would be considered a strong week for most sectors. Interesting to note the charge was led largely by the Offensive sector where as the laggard was from the Defensive sector.  

Technology (XLK) is leading Communication (XLC) for the Q1 leading performer with both gaining over 20% during the quarter. Financials (XLF) not surprising is the years worst performer down nearly 6% - lets hope the quarterly results due soon for this sector will give it a much needed boost. 

Discretionary remains in the Improving quadrant heading towards the leading quadrant. Communications (XLC) which has been in the Leading quadrant for 5 weeks appears to be losing momentum. Of note will be Staples (XLP) and Utilities (XLU) who are both in the Lagging quadrant with momentum towards the Improving section. Real Estate (XLRE) on the other hand is heading in the opposite direction and has left the Improving quadrant to join the laggards. 

For the coming week we are likely to see reduced activity in the market as we have a short trading week with most markets closed on Friday for Good Friday, additionally China as a whole will be on holiday for three days, Monday to Wednesday. (I may have to unearth some Chinese heritage in my blood line to claim 3 days off work 🤪) 

On the data front, we will have PMI data from US; Rate decision from AUD & NZD and of course the main event will be the NFP data in Friday 

Have a great week everyone!

Anil

Let's go trade!