Betting Against Banks

Well, the Fed did not delight yesterday.

It didn’t do anything terrible. It just didn’t do anything wonderful.

It raised rates like everyone thought and kind of hinted at pausing future rate hikes.

That’s not bad news at all.

But it surely wasn’t enough positive ammunition to stave off the terrible regional bank onslaught.

Smaller banks are getting killed today as everyone is starting to worry once again about the next bank to fail. 

PacWest Bancorp (PACW) chart is a nightmare for Bulls:

And that’s after PACW said its deposits went up!

JPM CEO Jamie Dimon promised the banking crisis was over a few days ago. That’s looking like a horrible prediction.

So what can we do?

We can put the financial ETF, Financial Select Sector SPDR Fund (XLF), at the top of our radar and simply wait for the storm to blow over. When XLF gets back above the long-term moving average (above $34), it could be a nice Buy:

But if we wanted action, a Short trade could be taken (or a Put could be bought) if XLF drops below $30.35:

We could shoot for a downward target of $24 or just trail the stop behind the moving average.

It doesn’t look like the crisis is over. 

And there are going to be some possibilities during the volatility. 

Happy trading,

Scott