Though filled with big point whipsaws the Tuesday relief rally was a welcomed sight but the banking uncertainty continues to cloud the path forward.  However, hopes for further recovery are in question this morning with the indexes pointing to a full reversal of yesterday’s gains in the premarket.  With potential market-moving economic data pending anything is possible so traders should plan for substantial price swings as the market reacts.  The huge global bank of Credit Suisse dropping 20% and suggesting a sub two dollar open only adds to the uncertainty ahead. 

During the night Asian markets rebound with modest gains despite posting as slow start for there post pandemic recovery.  However, European indexes see only red this morning as they reverse the Tuesday relief rally.  U.S. futures also suggest a full reversal at the open as we wait on several market moving reports that have the potential to add to the selling pain or completely reverse the open depending on the data revealed.  Buckle up for another wild ride.

Economic Calendar

Economic Calendar

Notable reports for Wednesday include ADBE, ARRY, EBIX, FIVE, FNV, PTRA, PLCE, PATH & ZTO.

News & Technicals’

Diamond Sport Group, an unconsolidated and independently run subsidiary of Sinclair Broadcast Group, filed for bankruptcy protection on Tuesday.  The company, which airs local NBA, NHL and MLB games across the country, said it plans to restructure its more than $8 billion debt load.  Diamond said it was still finalizing the restructuring support agreement with creditors. The plan could see Diamond separate from Sinclair to become a standalone operation, Diamond said. 

Democratic Sens. Elizabeth Warren and Richard Blumenthal asked the DOJ and SEC to open a probe of executives at Silicon Valley Bank.  The letter came on the heels of a joint announcement by the Justice Department and the SEC about a pending investigation into the SVB failure.  The inquiry will take place in separate and preliminary phases and look into stock sales that SVB executives conducted ahead of the bank’s collapse. 

“The challenging adjustment to the exit from zero-COVID, for both borrowers and lenders, will weigh on banks’ asset quality and profitability over the next 12-18 months,” said Moody’s analysts in a note Wednesday.  Moody’s had changed its outlook on China’s banks to “negative” from “stable” in November due to “deteriorating operating environment, asset quality and profitability.”

Tuesday’s relief rally was needed but proved challenging as it whipped in big point swings as the banking uncertainty keeps investors on edge hoping the contagion is now contained.  Unfortunately, we wake this morning to see a full overnight reversal a the global bank of Credit Suisse tumbles 20% after the Saudi backer says no more assistance as outflows surge.  If that were not enough we also face a big day of economic data that has the potential to move the market dramatically.  Traders should prepare for substantial price swings that could easily test the wide range between support and resistance levels.  The QQQ has held better than the other indexes but also indicates in the premarket a possible full reversal from yesterday’s close.  If the DIA, SPY and IWM make news lows it will become difficult for the QQQ to continue to buck the trend.   

Trade Wisely,

Doug