Market Update

 So Bitcoin failed on the same day as my last post.  I am not a big buyer right now of Bitcoin.

This past Friday was a huge event, the Federal Reserve bank announced the suspended bank SLR rule will go back into effect March 31st.   This is important, as this affects banks reserve requirements.  So for the last year banks could lend more money and have deposits with higher risk (less reserves).  For the last years banks could make more money by extending credit with less cost.  This party is about to end.

The market rallied to a new high leading up to the SLR announcement, now that it has been made, and the 2 trillion budget passed, there is not any free money news.  In effect the market has priced in everything we now have, and the SLR rule being re-instated maybe viewed as 'new news'.

First a large view of S&P 500.  The dark green rising line represents an uptrend since March 2020.  If the market breaks through it, it is an indicator that we are changing a pattern.  This happened in February 2021, but since the market recovered I adjusted the line to include that downturn in the 'uptrend' line.

So now lets pull into March 4th to today.  We can see that uptrend line touching on March 4th, and the market is re-approaching the 3892 level, the red dashed line.  If we hit that line on a closing basis its looking more bearish.  When is it time to panic? a close below 3693, the second red line.  We will have closed below the last low on March 4th and the low on January 29th.  It would indicate we are likely seeing a failing market.

 Interest rates are falling, and until this past Friday that indicated a market rally.  Now with interest rates falling, market is falling, that is also a change.  I expect if we have a market correction we can look back and know that rates fell as big money moved into bonds ahead of the public, to preserve their capital.  Its important, on a market failure, you do not try to catch falling knives, it is no secret the market is over-valued and over-leveraged.   My target for a downside is SPX 3000, which is a little over 20% lower from here.  We could go lower, but I suspect the FED would come to the rescue.

Good luck!