iShares US Technology ETF (IYW) & Greyscale Bitcoin Trust (GBTC)
Equity market action has been mixed over the last week, but it appears that the fear over the health of the banking system that cast a pall over equity market sentiment for much of this month has started to subside.
The last days of each quarter are typically quiet for business news in between earnings seasons and economic reports, but this time around, a sense of “no news is good news” has taken hold, particularly related to banking news. A flash of concern over Deutsche Bank last week quickly went away and between Credit Suisse and Silicon Valley Bank’s deposits being purchased, and no new major meltdowns at any banks in recent days, investors may be starting to think that the worst may have passed for now with governments, banks, and central banks stepping up quickly to put out fires before they spread too far.
For many sectors, it has been a case of declines slowing or stopping for the moment and caution still reigning but pessimism fading represents a start, and there have even been a few areas of renewed optimism which we shall discuss later.
Some of the flight of capital to defensive havens has started to fade. While still trending upward overall, Gold has encountered resistance near the $2,000/oz round number barrier. Meanwhile, the VIX Volatility Index, a widely used gauge of fear, has turned back downward and dropped back under 20.00.
Economic news picks up significantly over the next week with Monday bringing the start of a new month and a new quarter. Tomorrow, US Core PCE inflation, the Fed’s favorite measure is out. Monday brings Manufacturing PMI reports from around the world, followed by ADP Payrolls and Service PMI reports next Wednesday and Canadian employment numbers on Thursday. Although markets are closed on April 7th for Good Friday, US nonfarm payrolls are still coming out that morning.
In this week’s issue of Equity Leaders Weekly, we look at what technology stocks and cryptocurrencies have to say about changing investor confidence.
iShares US Technology ETF (IYW)
Trading in 2023 to date has been heavily rotational and coming out of the recent banking debacle, it appears another change in leadership is starting to take place. With Fed members hinting that there may only be 1-2 more rate hikes in the current tightening cycle, and the recent problems in the banking sector reminding central bankers that tightening too much can have negative side effects elsewhere, a sense that central bank sentiment may shift from hawkish to neutral and eventually dovish has started to take hold.
Although the depressed financial sector remains beaten down, investors looking to take on risk and seek out growth opportunities appear to be turning toward the Technology space. The iShares US Technology ETF IYW bottomed out back in November and found support at a higher low in early January. IYW staged a big breakout rally over January and February where it completed a bullish Spread Double Top breakout, built a bullish High Pole, and snapped a downtrend line.
The March correction for IYW was relatively moderate, not even enough to register a high pole warning and since establishing/retesting support at another higher low, IYW has launched into a new rally, completing bullish Double Top and Spread Double Top breakouts, a Bullish Catapult, and climbing to its highest level since August.
Previous column highs suggest initial resistance may appear near $95.00, followed by $98.85 based on a horizontal count, and then the $100.00 round number. Initial support appears near $86.00 based on a 3-box reversal.
Within the Technology area several sector ETFs have also broken out or shown technical promise lately including Video Games (HERO), Semiconductors (SOXX), Social Media (SOCL), and Biotechnology (IBB).
Greyscale Bitcoin Trust (GBTC)
Recent gains in cryptocurrencies, exemplified by Bitcoin and the Greyscale Bitcoin Trust (GBTC), may also suggest rebounding investor confidence.
The cheap money and massive liquidity fueled rally of late 2020 and early 2021 stalled out over the last nine months of 2021 as easy money policies started to tighten up. As central banks aggressively raised interest rates through 2022, Bitcoin and other cryptos collapsed in a bear market which took on a life of its own as margin calls came in and weak hands collapsed, most notably the FTX exchange bankruptcy and scandal.
Over the course of 2022, GBTC completed a Triple Waterfall bear market, December saw a final shakeout and purging of previous excesses in a round of tax-loss selling, which set the stage for the relief rally which kicked off 2023. As the banking system came under stress, alternative currencies have attracted renewed attention, first the defensive precious metals, and more recently the more aggressive and volatile cryptocurrency market.
The March correction for GBTC was relatively minor, consisting of only 3 boxes and bottoming at another higher low. This week, Bitcoin has started to rally again, blasting through $25,000 which has helped GBTC to break out of a downtrend, complete a bullish Double Top and a Bullish Catapult, and rally to its highest level since June.
A combination of previous column highs/lows and a horizonal count suggest potential resistance may emerge initially in the $22.50 to $24.40 zone. Initial support appears near $13.55 based on a 3-box reversal.
Disclaimer: SIACharts Inc. specifically represents that it does not give investment advice or advocate the purchase or sale of any security or investment whatsoever. This information has been prepared without regard to any particular investors investment objectives, financial situation, and needs. None of the information contained in this document constitutes an offer to sell or the solicitation of an offer to buy any security or other investment or an offer to provide investment services of any kind. As such, advisors and their clients should not act on any recommendation (express or implied) or information in this report without obtaining specific advice in relation to their accounts and should not rely on information herein as the primary basis for their investment decisions. Information contained herein is based on data obtained from recognized statistical services, issuer reports or communications, or other sources, believed to be reliable. SIACharts Inc. nor its third party content providers make any representations or warranties or take any responsibility as to the accuracy or completeness of any recommendation or information contained herein and shall not be liable for any errors, inaccuracies or delays in content, or for any actions taken in reliance thereon. Any statements nonfactual in nature constitute only current opinions, which are subject to change without notice.