Trading Insights: Markets “normalize” after 48 hours of uncertainty?
Recent high volatility produced winners and losers
After the panic came the reality: The collapse of SVB is not the end of the world, the majority of the US financial system is resilient. Most economics and central bankers are confident that there is limited contagion risk from the collapse of a few US specialized investment banks.
The reality is that the memories of the 2008 global financial crisis remain fresh in many investors' minds, and when news hit the wires that there was a collapsed US bank, investors hit the sell button.
Moving forward - the focus on the current inflation theme and the changing rate cycle is what should be the main market drivers over the next few months. In the meantime, no one can rule out the high impact “market noise” events that pop up here and there.
After all, without volatility how can a trader expect to discover trading opportunities?
How did financial assets react during the 48 hour “mini” financial crisis
Precious metals advanced higher over the last five days as investors shifted into “safe haven” assets in the wake of the SVB collapse.
- The Swiss Franc gained strength during the same period
- The VIX moved +20% as stock markets sold off triggered by investors' fears that the SVB collapse would spread throughout the financial system
- Even Bitcoin resurfaced as a “safe haven” asset during the 48 hours of market turmoil gaining +13%
Energy pushed lower, crude oil sold off and stock indices fell as investors’ fears of a relapse of the 2008 financial crisis drove investor sentiment during the previous 48 hours.
Upcoming Key Economic Events
Today March 15 Wednesday
- US producer price inflation
- US retail sales
|Time: GMT+0||Country/Region||Economic Indicator||Previous||Forecast||Actual||Units|
|2:00:00 AM||China||Industrial Output y/y||1.3||2.9||2.4||%|
|7:45:00 AM||France||HICP (f) m/m||1||1||-||%|
|7:45:00 AM||France||HICP (f) y/y||7.2||7.2||-||%|
|10:00:00 AM||Euro area||Industrial Production m/m||-1.1||0.5||-||%|
|12:30:00 PM||US||Empire Manufacturing Index||-5.8||-7.7||-||-|
|12:30:00 PM||US||Final Demand PPI m/m||0.7||0.3||-||%|
|12:30:00 PM||US||PPI ex. food and energy m/m||0.5||0.4||-||%|
|12:30:00 PM||US||PPI ex-food, energy, trade m/m||0.6||0.3||-||%|
|12:30:00 PM||US||Retail Sales m/m||3||0.1||-||%|
|12:30:00 PM||US||Retail Sales (ex-auto) m/m||2.3||-0.1||-||%|
|12:30:00 PM||US||Retail Sales (ex-auto, gas) m/m||2.6||-||-||%|
|2:00:00 PM||US||Business Inventories m/m||-||-||-||%|
|2:00:00 PM||US||NAHB home builder index||42||41||-||-|
|2:30:00 PM||US||Crude Oil Stocks ex. SPR w/w||-1.69M||1.188M||-||bbl|
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European Central bank (ECB) interest rate decision
0.5% hike is on the table unless an “event” triggers the ECB to evaluate the economic risk higher interest rates will have on the EU economy. Perhaps the SVB collapse is something the ECB should consider as a warning for EU banks?
Low probability high risk event if the ECB surprises markets with a smaller than 0.5% hike?
|US consumer sentiment|
Cross asset bullet points:
- Gold seen to be holding onto recent gains; price has now cleared above the resistance at $1,850 (bullish) which has increased the prospects for a further advance towards the $1,930s, downside risk at $1,840s which seems to be a key support
- NASDAQ 100 Index despite the multi month downtrend, technical indicators point to the prospects of higher prices in the very short term (5-13 days), current price is above its 9 and 18 day moving averages (bullish), the rate of change 4 and 13 day both above their respective signal lines (chart 2) (bullish), support near the 11,780s seems to be a short term bottom while current price momentum could carry price for a test of the 12,360s.
Capitalise on volatility in index markets
Take a position on moving index prices. Never miss an opportunity.
Not investment advice. Past performance does not guarantee or predict future performance.
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