With the S&P 500 and the ASX 200 both resting precariously on their 200-day moving averages, it won’t take much for a sharp sell-off to get going.
US banks are still seeing stiff selling pressure, despite the intervention by central banks to placate markets.
Is there more going on behind the scenes than we’re privy to?
I show you some scary charts in today’s Closing Bell video of commercial real estate companies in the US. They’re currently in free fall, and I’m wondering whether that could be the cause of the continued selling in US regional banks.
Perhaps this isn’t just a liquidity issue that has been fixed by the acceptance of bank collateral at par by the Fed…perhaps we’re staring down the barrel of a solvency issue as the heat comes out of commercial property at a rapid pace.
Many regional banks would have a high exposure to commercial real estate with a lower level than larger banks of US treasuries that can be parked at the Fed for cash.
I may be way off the mark with that view, but my point is the charts aren’t telling me to start increasing equity exposure in a big way.
If we see some solid buying in the S&P 500 and ASX 200 that shows that the 200-day moving average is acting as support, we could see the uptrend resume from here.
But I have hurdles above the market that I need to see breached before I shift to a more bullish view. I give you those levels in the video above.
My line in the sand beneath the market is at 3,800 in the S&P 500, which is only 4% below where we are now. If we head below there, I’m ducking for cover.
Good investing,
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Murray Dawes,
Editor, Money Weekend
