More Trouble in the Banking Sector

The systemic spread of fear reached as far as Japan with just about any small bank with exposure to commercial real estate feeling the pain.

A few banks issued warnings that hinted towards more pain to come for banks in the commercial real estate sector.

The very poor earnings from New York City bancorp caused a massive sell off. Apparently, the assets they absorbed during the SVB liquidation caused some trouble during this earnings call. Who could have guessed that that would happen?

There were a lot of gaps down that morning in the banking sector. The major regional banking ETFs fell as much as 9%, while NYCB collapsed over 40% at one point.

Directly below, you can see a chart for the regional banking ETF. The technical structure looks quite bearish with lower highs and lower lows. It seems like there will be more downside in the near future.

But the price action seems to be rebounding off the support of a potential opening wedge pattern. If this trend holds, then in the near term, we might see a larger rebound towards the top of the wedge before more downside takes place.

Anything could happen. The market acts irrational and could travel in any direction that it wants for seemingly no reason. But the one thing that we know for sure is that smaller banks with exposure to commercial real estate, more specifically office spaces, might be at risk in the near future.

The pandemic followed by a slow return to the workforce coupled with a new remote working environment has surely taken its toll on the banking industry.

You might need to scrounge through a lot of financial statements, but it might be a good idea to find banks less capital and exposure to commercial real estate.  You might find a good swing trade or investment opportunity.

As always, I am not a financial professional, and this is not investment advice. Be careful and be patient. Dont anticipate the market. Rather, participate in the market. Don't invest money that you can't afford to lose. Give some of your investments time and know when to cut your losses.

Don't be greedy. Don't invest in anything you don't understand. Don't put all of your eggs in one basket. Don't listen to the hype. Don't fomo or panic into or out of trades. Do your own due diligence. And just follow the trends. A trend is your friend. Good luck trading.