Charles Schwab - The Harbinger Of The Next Crisis?

2023년 7월 25일

While I believe that the markets are currently standing on the edge of a cliff and will not produce a new all time high, it's very important to note that price action is yet to confirm that, with the most significant catalyst of them all being Wednesday's FOMC.

Wednesday's FOMC is important because whether the Fed hikes again and how much they hike will determine what happens with bond yields, which determines what happens to bond prices (inverse correlation), which determines what will happen with the U.S. Petrodollar.

There's no FOMC again until September.

I discuss what I think will happen this week in the following call:

ES SPX Futures - Welcome to FOMCmageddon

Charles Schwab is an important piece of the U.S. banking structure because it's the 10th largest bank in the country.

When you take a look at recent price action on banks, everything seems to be going pretty well, and it's almost as if the Silicon Valley Bank crisis never happened.

SIVB's demise, however, was a really significant canary in the coal mine because that particular bank was not only one of the largest in the country, but a major intermediary between the West's venture capital community and the Chinese Communist Party.

You just absolutely have to keep an eye on what's going on with China and the International Rules Based Order right now, because everything "Taiwan War" is really talking about how the globalists can take control of China as the CCP falls.

Based on this, I think Taiwan Semiconductor is a significant long hedge right now because it's not a component of the U.S. indexes, and is a world leader in silicon wafer production:

TSM - Taiwan, Your Semiconductor Long Hedge

China is the world's 5,000 year country and has huge natural resources and a huge population of very sophisticated people, so it's a target.

If Xi Jinping is smart, he will weaponize the 24-year persecution, organ harvesting, and genocide against Falun Dafa's 100 million believers to protect himself and the Motherland.

But if he does this it means that the entire world will quickly be implicated in the Nero-like persecution of spiritual cultivators of an upright faith. The impact on the markets, our society, and our reality will be extreme.

And oh so hard to bear.

I can only say if you want to be long at this point, you need to be hedged long on volatility or you might die.

VIX - The 72-Handle Prelude

The enormous Schwab dump from March, which you primarily see was a fully manifested failure swing only on the monthly bars:



Was spurred on by the banking crisis, which served as a prelude to the very significant bear market rally we've had.

Now everyone believes new highs are in order and everything is going to be fine. It's time to go long, go on vacation, and collect money while being hammered in a speedo at the beach with the other men.

What a painful hangover.

The problem with the more up more right now crowd's thesis on Schwab is that the entire range above where we're at, and we're already flirting with the 79% retrace of the March gap down, was already filled, which we see on the weekly:



Moreover, there are two significant price action problems with the bull case from a market maker perspective.

The first is that Schwab dumped to exactly $45.00 in the first place. Computers don't like preserving round numbers and people just love to put stops under/at psychologically significant whole numbers.

The second is that the COVID dump was likewise $28.00. And for the same reasons, that's even more dangerous.

I am predisposed to believe that Schwab is likely to be the next Credit Suisse-style big short, and may even be the vanguard for the next crisis that would take us under SPX 4,200 and towards 3,700 in accordance with the new JPM collar, which I discuss below:

SPX/ES - An Analysis Of The 'JPM Collar'

As for what the fundamental story will be, it's very hard to say.

But let's compare Schwab's monthly bars you see above to some other top 10 banks:

Bank of America Monthly



Does not show any indication of failure swings and really just looks like a healthy retrace.

While Wells Fargo does not look strong enough, it also does not yet indicate a real short setup on higher time frames



And this is even more true for JP Morgan



And Goldman Sachs



Which can be, at worst, only be said to be setting up for the first leg of a failure swing. At worst.

And thus it is extremely notable that Charles Schwab is as weak as it is.

My call is the thesis that the optimal short entry is already here, with some kind of flirtation with the $70.00 mark due for FOMC.

And if Schwab and the banking sector and the equities sector are truly bullish, that would be great, but I still expect a stab back into the "wick play" area before it would move to set a new all time high, which means $69 to $50 is really quite the win if you're short and quite the loss if you're longing the top or haven't taken profits.

If Schwab and the banking sector are really the catalyst for something as disastrous as Nasdaq 9,000, then the target is under $28 and you're more or less standing on the edge of The Big Short.

Right now, with the VIX as suppressed as it is and price as high as it is, January '25 $55 puts are only $3.7~ with at the money puts being $8.3~

Just selling them on a flirt with $50 again, let alone $44.99, is already a big win.

Humans never believe in anything until they can see it. It's one of their worst deficiencies.

2023년 7월 25일

노트

Is notable that Schwab is already showing a post-earnings failure swing



Which would be another piece of information confirming that any kind of "finishing move" pump post-FOMC to end the week a place to sell and not a breakout to buy.