SPY Plunges As Investors Fear SVB Collapse Isn't The End Of Bank Failures, Jobs Numbers Fan The Flames

The SPDR S&P 500 SPY took another beating on Friday, sliding about 1.7% after dropping over 2% on Thursday amid fear surrounding the banking industry and jobs numbers that came in hot.

The shocking news that SVB Financial Group, the 19th largest bank, collapsed within 36 hours sparked panic across the financial sector. Banks of all sizes are now fearful that they will suffer a liquidity crisis in the current economic environment. And the jobs numbers aren’t unrelated.

The hot jobs data, showing the U.S. added 311,000 new jobs in February, indicates the economy remains strong. This could push the Federal Reserve further toward hiking interest rates by 0.5% later this month.

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The already high-interest rates are adding pressure on banks. If the central bank continues with its hawkish stance, that could cause a meltdown in the banking industry.

The news caused the SPY to close Thursday’s trading session under the 200-day simple moving average (SMA) and on Friday, the ETF fell under a long-term descending trendline, which could spell trouble ahead for the stock market.

The SPY Chart: The SPY reversed into a downtrend on Feb. 2 and has been making a consistent series of lower lows and lower highs. The ETF’s most recent lower high was formed on March 6 at $407.45 and the most recent confirmed lower low was printed at the $392.33 mark on March 2.

• On Thursday, the SPY printed a bearish Marubozu candlestick, which indicated lower prices were likely to come on Friday. When the market opened, the ETF attempted to regain the 200-day SMA as support but failed before a further sell-off began.
• If the SPY closes the trading day near its low-of-day price, the ETF will print a second bearish Marubozu candlestick, which could indicate lower prices will come again on Monday. The second most likely scenario is that the SPY will consolidate the recent downturn with an inside bar pattern and trade sideways.
• Eventually the SPY will bounce up to at least print another lower high and that is likely to happen early next week because the ETF’s relative strength index is entering near-oversold territory. When the SPY bounces, it’s likely to reject at the descending trendline, at least temporarily.
• The SPY has resistance above at $385.85 and $394.17 and support below at $381.30 and $371.48.

Read Next: EXCLUSIVE - Jim Cramer Recommended SVB Financial In February, An Example Of 'His Reverse Midas Touch'

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