SVB Sells Securities to Cover Loss
FXCM's USBANKS basket dropped yesterday. The basket was down around 9.6% for the day. Shares in JPMorgan Chase and Wells Fargo were down 5% and 6%, respectively.
The catalyst for the move was SVB Financial Group, the parent of Silicon Valley Bank. It sold securities from its portfolio to cover a $1.8bn loss. It has also announced plans to raise capital via a common and preferred share offer. Withdrawals, mainly from venture capital clients who need the liquidity, and higher interest rates have forced SVB to realign its portfolio.
SVB Financials' shares were down 60% on the day.
The news has traders taking a closer look at the banking sector for similar exposure. The first concern is how much are banks securities really worth if they are forced to sell. Second, can banks hold on to their deposits without raising rates for depositors, which would hurt margins.
US.BANKS has charted a higher trough (HT), followed by a higher peak (HP). This is a defined uptrend. Investors have moved into banks to take advantage of the rate hiking environment. Yesterday's 9.6% decline is marked by the blue arrow. The basket's RSI has slipped below 50 (green rectangle). The longer its stays on the bearish side of 50 the more pressure will be applied to US.BANKS.
The basket remains in uptrend until it falls below the previous higher trough (green line).
Senior Market Specialist
Russell Shor joined FXCM in October 2017 as a Senior Market Specialist. He is a certified FMVA® and has an Honours Degree in Economics from the University of South Africa. Russell is a full member of the Society of Technical Analysts in the United Kingdom. With over 20 years of financial markets experience, his analysis is of a high standard and quality.