On the daily chart below, we can see that the market is consolidating at the key 1731 support. The sentiment around the banking sector remains skewed to the downside for now. Regional banks make up a notable chunk of the Russell 2000 index and that’s why the index underperformed for example the S&P500.
Tonight the Fed took another emergency action enhancing the provision of US Dollars via swap lines with other major central banks to increase liquidity. This weighed on the risk sentiment further as the market is fearing that something serious is happening in the banking system and as futures market opened, the market sold off non-stop during the APAC session
On the 4 hour chart below, we can see that the sellers tried a break below the support but it’s now getting faded. It’s likely that we’ll see first a pullback before another push lower if the market remains on the defensive and the sellers want to position short into the FOMC meeting.
It may be that any action the Fed takes on the interest rates front would be bearish for the market. On one hand, if they pause or cut it would signal that something really bad is happening. On the other hand, if they keep hiking it may pressure the market even more.
On the 1 hour chart, we can see more closely the range created between the support at 1731 and the resistance at 1800. We may see now the sellers leaning on the trendline and the moving averages, targeting the breakout and new lower lows. The buyers, on the other hand, will need a break above the trendline to get some conviction and target the top of the range at 1800.
