Connect with us


Fintech Roundup: How going Fast and furious can ruin your startup



Welcome to my weekly fintech-focused column. I’ll be publishing this every Sunday, so in between posts, be sure to listen to the Equity podcast and hear Alex WilhelmNatasha Mascarenhas and me riff on all things startups! And if you want to have this hit your inbox directly once it officially turns into a newsletter on May 1, sign up here.

The big events in the fintech world over the last week felt like a very different vibe from 2021, which was filled with mega rounds, celebrations and lofty valuations.

First off, 3-year-old one-click checkout startup Fast announced it was shutting down after struggling to raise more capital to keep operations running. The announcement wasn’t a complete shock considering there were hints of trouble, as reported by The Information, the week prior. Those hints included the revelation that the startup had generated just $600,000 in revenue for all of 2021 despite raising $120 million in venture capital earlier in the year (in a round led by Stripe) and rumors that the company was having trouble raising more funds, and as a result, might be seeking a buyer.

There were conflicting sentiments on social media (Twitter mostly) about the company’s demise. I’ll spare you the actual tweets but will say this: a company shutting down should not be cause for celebration. No matter how much irresponsibility on the part of leadership or others within the organization may have contributed to said demise, the majority of the company’s employees likely worked very hard to help it be successful and don’t deserve to be mocked or ridiculed, even if not directly. Now, hubris on the part of executives is another story. (Like maybe don’t refer to yourself as a trailblazer when announcing that your company is shutting down). The takeaway here? Humility goes a long way in life, and especially in the startup world. Don’t go bragging until you have something to brag about, and even then, let your results speak for themselves. On a positive (and somewhat unusual) note, BNPL giant Affirm said it would be giving job offers to “the vast majority” of Fast engineers, as reported by the brilliant Natasha Mascarenhas.

Speaking of, um, hubris – made headlines, again. The digital mortgage lender on April 6, offered corporate employees and product, design and engineering staff the option to separate from the company voluntarily in exchange for paid severance and health insurance coverage for 60 days. The move came amidst reports that the company was losing as much as $50 million a month, which were neither confirmed nor denied when I reached out. Then the next day, TechCrunch obtained a recording of a Zoom meeting in which CEO Vishal Garg addressed the employees that remained after had just laid off 900 employees, or 9% of its staff on December 1. In a word, the recording was brutal. The executive’s tone and body language conveyed no remorse around the layoffs and he even issued what felt like a veiled threat that going forward, any employees deemed to be non-productive too would be exited. During the recording, Garg also made many shocking – and incriminating – statements such as admitting the company had “pissed away” $200 million of the $250 million it made last year and that he had lacked discipline when it came to Better’s hiring strategy at the onset of the pandemic. One day later, on December 7, it was revealed that CTO Diane Yu was transitioning from her role as Chief Technology Officer – a position she had just assumed in January 2021 – into an advisory position.

As my friend (and other EquityPod co-host) Alex Wilhelm and I discussed on the show this week, at least had a viable business that was doing well at one point – well enough to attract the likes of SoftBank and for it to be planning to go public via a SPAC. (We saw the deck, mind you). And former employees admit that the underlying technology the business built is actually good. It feels like in this case, getting overly confident and not accounting for a less favorable mortgage market got in the way of what could have been an impressive growth trajectory. Either way, no matter what mistakes its leadership has made over the past couple of years, it’s likely safe to say that as in the case of Fast, many of employees are reeling from what has taken place and my heart goes out to them. Alex and I also agree that often, humble CEOs often see better outcomes than their less humble counterparts. Maybe it’s because people find it easier to be motivated by someone they respect and who respects them? We’re no experts, of course, but there does seem to be a correlation in several companies we’ve covered. Humility should not be seen as a weakness, in my humble opinion, but more of a strength.

With the funding market slowing down, we’ll likely see more layoffs and shutdowns, unfortunately. In case you missed it, I wrote a feature last week on how taught us how not to downsize. Here’s to empathetic leadership as some startups potentially face tough times. A little empathy, compassion and humility can go a long way.

Now on to funding rounds

While the pitches aren’t as fast and furious, they’re still coming. This might also be a good time to note that I am not covering as many funding rounds as I used to. For one, I now have this column (which is about to become a newsletter), that gives me space to talk about rounds I did cover as well as some I did not have the bandwidth to cover. And secondly, I am trying to a) keep myself more available for breaking news when it hits and b) do more deeper dives, trends and analysis pieces. So, just a heads up!

Back to funding rounds.

Last week, I wrote about Fidel API, a startup that actually started out doing one thing before becoming another. This is the case for many startups – companies realize that the technology they’ve built to solve an internal problem might have more potential than the technology they were originally setting out to build.

The London-based company, its CEO and co-founder Dev Subrata told me, started out as a customer engagement platform in 2013.

“We essentially needed our systems to speak to underlying payment systems and there was no easy way to do that,” he said. “We ended up spending way too much time and money that nearly bankrupted the company a few times over.”

Once Fidel realized that the programming interface it had built to solve that problem had promise, the execs had to make the “tough decision” as to whether they should keep it to themselves or put it out there for others to benefit from.

“We realized if we were to keep it to ourselves, it would only be serving one purpose, which would have been our product,” Subrata recalls. “But we couldn’t have a consumer product and also be the enabler for others so we chose to be the enabler and never looked back.”

Today, Fidel API provides identity, data and payments tools that it says gives developers a way to capture consent permissions and “securely” connect payment cards to a service or application. Fidel API is industry agnostic, with customers ranging in the “hundreds,” from startups to giants such as Google, Royal Bank of Canada and British Airways. Developers use the company’s tools to power a range of features, including digital receipts, omnichannel attribution, loyalty and rewards, expense management and personal finance management. 

Bain Capital just led its $65 million Series B. You can read more about it here.

Remote, which has built a platform to hire distributed employees, and then make sure they are remunerated easily and legally — in other words, tech that helps companies with some of the trickiest aspects of managing a remote workforce —announced it raised $300 million in funding at a $3 billion-plus valuation as it emerges as one of the bigger players to watch in the world of HR addressing global and distributed workforces, reported our own Ingrid Lunden. (More on this topic later)

Chicago-based, which describes itself as a “financial planning and analysis platform (FP&A) for growing businesses and their advisors,” closed on $2 million in seed funding from Underscore VC in Boston.

The startup claims that it “integrates with Quickbooks Online and Xero in less than five minutes” and saves teams 20 or more hours a month on managing, planning, and predicting their finances and cash flow. It says it uses machine learning to ingest up to three years of financial data and then learns from historical trends, seasonality and other traits to build detailed models and forecasts. 

The area is one that is clearly attracting investor interest. Last October, I wrote about Vareto, a startup aiming to help companies conduct more forward-looking financial planning and analysis, that came out of stealth with $24 million in total funding. While Vareto is mainly targeting larger, enterprise businesses, is after smaller, growing ones saying that its goal is to “alleviate the pain founding teams experience wrangling the complexity of finances and forecasts while running fast-growing businesses.”

In the case of, its founders are – in the company’s words – “a Black former banker and an Arab fractional CFO” who “lived the pain small businesses have managing their finances and cash flow every day.”

Spain’s Ritmo closed a $200 million debt funding round led by i80 Group and Avellinia Capital, in what it claimed was “one of the largest funding rounds of any e-commerce finance business in Europe and Latin America (LATAM).”

Founded in 2021 by Raimundo Burguera, Iñaki Mediavilla and Iván Peña, Ritmo says it provides working capital financing and an automated Buy Now, Pay Later (BNPL) payment system for e-commerce businesses “to overcome supply chain challenges, ensuring they can better manage cash flow and scale faster.” 

The company says that in the past seven months, it has achieved “a 12x growth rate” with more than 600 loans made in five countries across two continents. 

– Per FinSMEs, EnKash, a Mumbai, India-based “Spends Management Platform and Corporate Cards company,” raised $20 million in a Series B funding round. The company has close to 120 employees and says it processes annualized spends worth about $2 billion on its platform.

The credit-oriented fintech platform Liquidity Group, which funds later-stage technology companies, announced a new raise of $775 million from private equity house Apollo and MUFG Bank., writes TechCrunch’s Mike Butcher.

Founded in 2018, Liquidity employs machine learning and real-time data to automate the full credit investment lifecycle, committing more than $1 billion in capital. Investments to date include Etoro, Zetwerk and Homer.

Axios Pro and former TC reporter Ryan Lawler covered renovation financing startup RenoFi’s $14 million Series A funding round led by Canaan, with Nyca Partners and CMFG Ventures participating. He wrote: “The company aims to make the surging demand for home improvements affordable by providing financing to its customers.” This caught my eye because I had actually covered RenoFi’s $6.4 million financing in June of 2020. Canaan led that round, too. At that time, Justin Goldman, the company’s CEO and co-founder, emphasized that RenoFi was not a lender. Instead, he said, it partners with mortgage lenders such as credit unions, which offer “RenoFi Loans.” 

In other news

– On April 4, writes TC’s Tage Kene-Okafor, Clara Wanjiku Odero – a former employee of African payments giant and unicorn Flutterwave – accused the company’s chief executive officer Olugbenga ‘GB’ Agboola of bullying and harassing her for years. She made the allegations in a Medium post and series of tweets that came after. Get all the details in Tage’s comprehensive piece here.

On April 5, Block confirmed a data breach involving a former employee who downloaded reports from Cash App that contained some U.S. customer information. In a filing with the Securities and Exchange Commission (SEC) on April 4, Block — formerly known as Square — said that the reports were accessed by the insider on December 10. TC’s Carly Page breaks it down for us here.

– Unsurprisingly, fintech startups were well-represented in Y Combinator’s W22 batch, with 35 international companies participating and 25 more tagged as crypto-focused. One trend that caught our eye was that at least five startups – from several different regions – referred to themselves as the “Brex for” their particular geography. Alex and I took a fun look at the phenomenon in this piece.

– Forbes contributor and fellow fintech enthusiast Ron Shevlin on April 4 wrote about the fact that “in JPMorgan Chase’s recent earnings call, the $3.76 trillion (in assets) bank announced its plans to increase its annual technology budget to $12 billion, 26% more than it spent in 2020.”

Twenty-six percent would not be a big jump, IMHO. But I’m a little confused because in January 2021, when I interviewed Rohan Amin, Chief Information Officer (CIO) of Chase’s Consumer & Community Banking (CCB) unit, I was told that the bank’s tech budget was $12 billion. Looks like I may need to put a call into the bank to see what’s what. But either way, as we all know, the pandemic pushed banks and other financial institutions to up their digital game. And $12 billion is still A LOT of money.

Shevlin, in his snarky manner, drills down on what the bank thinks about all sorts of fun things like embedded finance, DeFi and blockchain, APIs and artificial intelligence. A fun and informative read.

-Cross-border HR service Deel announced last week that it had launched in Korea with the goal of helping companies in the country onboard workers, run payroll and comply with local labor regulations “to encourage global expansion.”

I’ve written about fast-growing Deel numerous times as the company is one of those startups that has seen rapid growth over the past year. Last October, I wrote about how Deel – nearly exactly six months after raising $156 million at a $1.25 billion valuation – announced it had raised $425 million in a Series D funding round that gave it a valuation of $5.5 billion.

During that same six-month period, Deel CEO and co-founder Alex Bouaziz  told me  the startup saw its global customer base jump from 1,800 to over 4,500, including companies such as Coinbase, Dropbox and Shopify, among others.

It’s in a similar space as Remote, mentioned in the funding round section above, proving that remote work is no passing trend.

Card issuance company Highnote and fintech GoDo partnered to create what they call a “GoDo Card,” and describe as a “fully functioning debit card” that offers underbanked workers earned wage access, meaning cardholders can access a portion of their wage as soon as they finish work, as opposed to waiting on a traditional pay cycle.

Some banks charge account holders who are unable to maintain a minimum balance. The partnership aims to boost inclusion by eliminating minimum balance and overdraft fees and helping cardholders avoid predatory lenders and thus, minimize debt.

– MissionOG, a Philly-based growth equity firm, announced last week that it closed on $167 million for MissionOG Fund III, its fourth investment fund, exceeding its target of $150 million. 

In pitching the news, the firm’s comms team told me that MissionOG is different from many in that it has an “exclusive focus on financial services and related data and software opportunities.”

Its team has “deep” operating experience – hence the “OG” in its name, which stands for “operating group.” Portfolio companies include Alkami (which went public in April 2021), Global Processing Services (“GPS”), Autobooks, Featurespace and Venminder.

With its latest fund, MissionOG is looking to invest $8 million to $12 million into “high-growth companies” that have successfully commercialized their solutions within a small portion of a large addressable market.

– Let’s end this edition on a positive note. In a generous gesture, Stripe waived the identity fees for Ukraine Take Shelter. According to the Business Post, the site is an online platform that is linking Ukrainian refugees to host families across Europe. Stripe’s move came reportedly after the website ran up a big bill using the payments company’s identification tool to verify people.

Thanks, as always, for reading. Hope you enjoy the rest of your weekend! See you next week.


A Deeper Look At DeSantis’ Anti-ESG Legislation: What Is ESG?



Florida’s anti-ESG legislation, championed by Governor Ron DeSantis, is positioned to be the model for anti-ESG legislation in the United States. 20 Republican Governors have already signed on to adopt similar policies. The legislation itself is massive and sweeping, touching on multiple areas of law and policy. This is the first in a series of articles that will deep dive into Florida’s proposed legislation and look into its potential impacts in the larger ESG debate. However, before looking at the language of the legislation, we must start at the beginning. What is ESG?

ESG stands for environmental, social, and governance. It has gone by other names over the years including impact investing, social impact investing, and sustainable investing. At its core, it is an investment strategy. A way to use your money to impact change. We often see this in political movements. Conservatives boycotting Disney because of “woke” policies, or going to a business to support their Christian values. Liberals boycotting businesses over Black Lives Matter stances, or supporting environmentally friendly companies. Companies know that, and they include it in their marketing strategy.

In theory, ESG just took that to the next step and applied it to your retirement funds, giving you the option to choose how your money is invested. Fund managers already present their clients with multiple options, allowing the investor to choose their level of risk. ESG adds another option, where the investor can choose a lower return, but feel like their money is doing something good. Investing in a green company may not make you as much money, but you’ll feel like you’re doing your part to help the environment. If that is your choice, you should be allowed to make it. However, ESG took on a life of its own.

If I told you that the United Nations developed a plan to manipulate financial investments to force businesses to enact environmental and social policies that align with their goals, announced by Al Gore, you would probably start pushing me into the conspiracy theory category. Yet, it happened. It didn’t happen in secret. There are no leaked documents or conspirators. It happened in public, through public meetings, with clearly stated goals and outcomes, and they held a press conference to announce it. We just didn’t know what they were talking about.

That push drove ESG, primarily in the European Union. This rapid growth was problematic for those tasked with making financial decisions. The first real issue for ESG was the lack of clarity. Sure, “e” stands for environmental, “s” stands for social, and “g” stands for governance. “C” is for cookie, and while that is good enough for the Cookie Monster, that is not good enough in the world of financial investments. Terms need clear definitions, measurements, and projected outcomes.


When most people discuss ESG, they gravitate towards the environmental piece. It appears to be fairly self-explanatory; a company that is environmentally friendly. However, environmentally friendly is a vague term. It could be a reduction in waste, adding solar panels, low emission vehicles, or any number of factors, all of which are self-reported by the company. As no reporting standards are currently in existence, companies can make their claims based on their own internal calculations, and fund managers can make their choice to invest based on what they choose to prioritize. This has led to what is known as greenwashing, or when a company exaggerates its environmental policies in order to appear more environmentally friendly than they really are.

Do not overlook the social and governance components, as that is where the real conflict arises. In the United Kingdom, social includes investment in affordable housing. In the European Union, it looks at factors like the use of slave labor in the supply chain. In the United States, it includes diversity and inclusion. Those factors, and how they are weighed, vary wildly from jurisdiction to jurisdiction and fund manager to fund manager. ESG is not just about the environment.

There are international efforts to create reporting standards, but they will not be released until later this year and no front-runner has been selected. That alone is problematic, to say the least.

To this point, I’ve presented ESG as if it is your choice, but ESG has taken a turn from elective to mandatory. A select group of fund managers followed the UN’s lead and started including ESG factors in all their funds, under the premise that ESG is good for the long-term growth of a company. This approach has wide ranging impacts. It effects long-term growth calculations for publicly held companies. It impacts credit ratings for government bonds. Banks are calculating the risk of business loans and accounts based on ESG. What was an abstract concept a few years ago, is now directly driving sectors of the business and financial markets.

In response, business leaders and Republican elected officials began pushing pack. The Trump administration introduced a Department of Labor rule limiting ESG that was eventually overturned under the Biden administration. States then started taking action. Texas struck first by adjusting how they invested state pensions. Florida followed soon thereafter by doing the same, then took it a step further introducing their anti-ESG legislation.

The legislation addresses five key areas: investment of state money, investment of pension funds, issuing bonds, banks, and government contracts. Those areas are about states controlling what they can control. Over the next few articles, each of those areas will be looked at in depth. What is happening in Florida could be the future of the anti-ESG movement in the United States.

Continue Reading


Don’t Make A Mess Out Of The Texas Citizens Participation Act



The Texas legislature is considering a proposed amendment to the Texas Citizens Participation Act (TCPA), which is the Texas Anti-SLAPP law and roughly the equivalent to the Uniform Public Participation Act (UPEPA) which is in the process of being adopted nationwide. Because the proposed amendment has the potential to create more problems than it solves, and in fact may create a mess of things, some analysis is in order.

The TCPA is found at Texas Civil Practice and Remedies Code § 27.001, et seq. The TCPA basically provides that if one party files an action some sort of action which infringes upon certain constitutional rights of another party, that second party (movant) may file a motion to dismiss the action of the first party (respondent) in certain circumstances.

I will not go into the entire operation of the TCPA, but will instead here focus upon only the part that is relevant to the proposed amendment.

If the movant’s motion to dismiss is unsuccessful, then the movant may appeal under § 27.008 of the TCPA and the corresponding § 51.014(a)(12) that provides for an interlocutory appeal of a trial court’s denial of a motion to dismiss. Very importantly, § 51.014(b) provides that while this appeal is ongoing, all other proceedings at the trial court are stayed pending the appeal.

The stay pending the resolution of the appeal is necessary to avoid potential wasted effort by the trial court and the litigants. Otherwise, if the litigation were to proceed before the trial court while the appeal was ongoing, but the appeal later reversed the denial of the TCPA motion, everything that the trial court and the litigants would have done in the interim would be totally wasted activity.

Of course, the respondent who defeated the motion to dismiss wants to get on with their case, but the truth is that the stay pending appeal is probably not going to be very long anyhow, because § 27.008(b) provides that “[a]n appellate court shall expedite an appeal or other writ, whether interlocutory or not, from a trial court order on a motion to dismiss a legal action under Section 27.003 or from a trial court’s failure to rule on that motion in the time prescribed by Section 27.005.” So, if there is a delay in the litigation, it should be only a short one and thus there is no need for a relief from the stay.


The bottom line is that there is nothing wrong with this stay during appeal as it currently exists in the statutes. It doesn’t need fixing. Nevertheless, in SB896/HB2781 the Texas legislature is considering tinkering with § 51.014 to limit the application of the stay pending appeal to three circumstances:

First, where the motion to dismiss failed because it was untimely under § 27.003(b);

Second, where the motion to dismiss not only failed, but was also deemed to be either frivolous or assert solely for the purposes of delay, per § 27.009(b); or

Third, where the motion to dismiss was denied because an exemption to the authorization of the motion existed (such as commercial speech, wrongful death claims, insurance disputes, evictions, etc. ― Texas has a bunch of such exemptions) under § 27.010(a).

The reason for this tinkering is implicit: If the TCPA motion to dismiss does not seem like a close call, there is no reason to delay the litigation while the movant (who lost the motion to dismiss) prosecutes what is likely a fruitless appeal.

Except that there is.

The hard truth is that trial courts frequently get things wrong. So frequently, in fact, that states such as Texas have full-time appellate courts with numerous districts to review purported errors by the trial courts. Particularly where the state courts are asked to consider matters with constitutional implications ― issues which, unlike the federal courts, they rarely deal with ― the state courts have a tendency to err. Plus, once a trial court has made one misjudgment, the effect is usually to snowball and result in other bad rulings that follow, such as sanctioning a party who was right in the first place.

Thus, long ago it was determined that it did not make any sense for litigation at the trial court level to go on at the same time that there was an appeal pending, for the reason that if the appeal ends in a reversal then whatever the courts and the parties were doing up to that point in the trial court becomes a giant pile of wasted judicial resources and efforts. This is the very reason why § 51.014(b) stays activity at the trial court level for interlocutory appeals. Such is even more important in the Anti-SLAPP context, such as with the TCPA, where one of the primary purposes of such statutes in the first place is to conserve the judicial resources of the courts and the parties — and particularly the party against whom abusive litigation has been brought.

However, the single counterargument against allowing the litigation to go forward during the appeal as in the proposed Texas amendment is this: The appeal is not going to last very long anyway, because of the mandate of § 27.008(b) that the appellate court must resolve a TCPA appeal expeditiously. Because the appeal period will be short, there is really no compelling reason to risk wasting judicial resources and the parties’ resources in the meantime. The proposed amendment to the TCPA is a solution in search of a problem.

It also must be considered that what the Texas amendment really attempts to do is to negate what amounts to a frivolous appeal by a party that has lost its TCPA motion. However, there is already a remedy for that, which is that the Texas Court of Appeals may itself award monetary sanctions for a frivolous appeal. Thus, if a party files a bogus appeal of the denial of their TCPA motion, the Court of Appeals may award appropriate monetary sanctions, not just against the party who brought the appeal but also against the counsel who filed that appeal. This is a significant deterrent to the bringing of such appeals.

But let us consider what might be done in these circumstances if somebody really just wanted to do something for the sake of doing something. It would not be the proposed Texas amendment. Instead, the appropriate solution would be to allow the Court of Appeals the discretion to lift the stay under § 51.014(b) upon the request of a party or upon its own initiative in the described circumstances.

What happens with all appellate courts, including the Texas Court of Appeals, is that the particular panel makes a decision on the outcome of the appeal pretty quickly. The delay in the Court of Appeals issuing its ruling is that it takes time to write the opinion to support the ruling. If the Court of Appeals knows that it is going to rule to deny the appeal, then the Court of Appeals at that time could lift the stay at the trial court level in anticipation of their future formal decision denying the appeal.

The problem of the stay pending appeal is not a trial court issue, and should not be resolved by changing what goes on with the trial court, but instead is an appellate issue that should properly be resolved (if at all) by allowing the Court of Appeals the option of terminating the stay. One thing is certain: The proposed amendment to the TCPA that automatically terminates the stay is not the way to deal with this issue ― if, indeed, an issue actually exists at all.

Continue Reading


What Are The 2nd Quarter Teflon Sectors?



The FOMC decision last week fulfilled most expectations, but it was the details that hit stocks Wednesday afternoon. The conflicting comments between Fed Chair Powell and Fed Secretary Yellen on bank guarantees spooked the market as the futures dropped 70 points in the last hour.

It was not surprising that the concerns over the banking system continued last week after last weekend’s emergency buyout of Credit Suisse. The pressure on Deutsche Bank (DB) increased Friday as the US shares were down 5.5% in reaction to their credit default swaps (CDS) hitting a four-year high on Thursday.

For the month DB is down almost 25% as the German Chancellor Olaf Scholz came out with supportive comments on Friday. Most banking analysts do not appear to be worried as Stuart Graham and Leona Li, analysts at global financial research firm Autonomous, said that “Deutsche is in robust shape.” Also, DB has turned in 10 straight quarters of profits.

What was surprising for most was the stock market’s ability to rally on Friday as most of the major averages did close the week higher. Once again the Nasdaq 100 led the way up 2% to push its year-to-date gain to 16.7%. The S&P 500 ($SPX) and Dow Jones Industrial Average ($INDU) had smaller gains of 1.4% and 1.2% respectively. The disparity on a YTD basis has widened further as $INDU is down 2.7%.


The iShares Russell 2000 had a volatile week but closed up 0.7% while the Dow Jones Utility Average was the weakest, down 1.4%. It is now down 5.9% YTD as it is the weakest performer. For the week the NYSE advance/decline ratio was positive as 1808 issues were advancing with 1385 declining.

As of Friday’s close, the Invesco QQQ Trust (QQQ) was up 1.97% in March as it closed just above the 20-month EMA at $305.24. The next monthly resistance is the August high at $334.42. The multiple-month highs from early in 2022, line a, are in the $370 area. The March low at $285.19 is now an important support level to watch.

The Nasdaq 100 Advance/Decline line is a bit higher this month but still below its WMA as it has been since August 2022. A move above the WMA does not look likely this month. The weekly A/D line (not shown) is fractionally above its WMA as is the daily A/D line.

The monthly relative performance (RS) has moved above its WMA for the first time since late 2022. This is a sign that the QQQ is leading the SPY higher as we move into April. In late January the weekly RS signaled that QQQ was leading the market higher.

The outperformance of growth stocks was not the consensus view at the start of the year or in February. Now the question is whether the growth stocks will continue to move higher despite the strong recessionary fears.

So far in March, the iShares 1000 Growth ETF (IWF) is up 3.5% while the iShares 1000 Value ETF (IWD) is ETF is down 4.3%. The ratio of IWF/IWD formed a V-shaped bottom at the start of the year and moved back above its 20-week EMA in late January.

The downtrend (line a) was broken two weeks and the resistance at line b has also now been overcome. The August peak at 1.631 is the next barrier for the ratio. The ratio is well above its 20-week EMA so it is a bit extended on the upside. The MACD-His did form a slightly positive divergence at the late 2022 lows, line c, and is still rising strongly with no divergences yet.

The monthly analysis of the iShares 1000 Growth ETF (IWF) shows that it closed on Friday just below the 20-month EMA at $237.87. The February high was $242.87 while the monthly starc+ band is at $290.06. The long-term support from 2020, line a, was tested in October.

The monthly RS has just moved above its WMA suggesting that IWF can continue to lead the SPY over the next quarter. The volume has declined over the past two months and the OBV is still slightly below its WMA. The weekly indicators (not shown) are positive.

Of the eleven sectors, there are just two where the monthly RS is rising and it is above its 20-month WMA. The Technology Sector Select (XLK) is up 7.1% so far in March and is currently trading above the February high. The high from August at $150.72, line a, is the next barrier.

The monthly RS has moved further above its WMA in March consistent with a market leader. The volume increased a bit in March and the OBV has moved above its WMA for the first time since April. The weekly indicators (not shown) are positive as the RS is well above its WMA.

The Communications Services Sector (XLC) is up 6.2% in March with the next resistance at $60.24. On a move above this level, the monthly starc+ band is at $67.60. The March low at $51.37 should be good support.

The monthly RS has just moved above its WMA indicating that XLC is leading the SPY. The RS dropped below its WMA in October 2022, one month after the high. The volume has been strong this week and the OBV has moved above its WMA and the resistance at line c, which is a good sign. The weekly studies (not shown) are positive with last week’s close.

Crude oil reversed on Friday to close back below $70. In last week’s review I shared my concerns over this sector as it could hold the major averages back. Sharply lower crude oil prices also could add pressure on some of the regional banks which is not what they need.

In conclusion, the analysis of the Growth/Value ratio and the monthly RS analysis suggests that growth stocks and EFFs should be favored on any pullback. The technical evidence indicates they should be Teflon-like in the next quarter and hold up better than the value stocks.

Continue Reading