For the second consecutive trading session U.S. Equity Markets closed flat. I cannot remember the last time that this scenario played out. Despite the flat markets, the VIX made a new 2023 low, closing lower by 2.21% at a price of 16.46. The recent banking crisis has caused depositors to flee regional banks for the perceived safety of big money centres like JPMorgan Chase (JPM) and Wells Fargo (WFC). Even more, folks are realising that they have been missing out on the benefits of rising rates when it comes to their interest-bearing bank accounts. That is leading clients to search for higher yields elsewhere. The difference between the amount the central bank raises the Federal-Funds rate and the amount banks raise deposit rates is known as a “deposit beta.” Here is how the Federal Reserve Bank of New York describes the term: When rates are rising like they are now, the spread increases banks’ earnings (as long as deposit balances remain steady). This is because banks are much quicker to raise the rates on loans than they are on deposits. After all, raising rates on loans means banks earn more in interest and raising rates on deposits means they are paying more out. When interest rates were rising in 2000 and 2008, the rates on deposits never fully reached the level of the Federal-Funds rate. The same is happening today as the deposit rate is much lower than the Federal Funds. In fact, the current rate-tightening cycle has been so aggressive that this is the largest difference we have seen in recent history. This “deposit gap” allows us to see the earnings potential for depositors relative to other investment vehicles. The deposit gap has surged to its highest level in nearly 30 years. This deposit gap was already taking its toll on the banking landscape. Large depositors were already shopping around for the best rate available. The turmoil in the regional banking sector really just accelerated things. Recently, this has forced some of the largest financial institutions in the nation to raise deposit rates to their highest levels in years. But big banks like JPMorgan and Bank of America (BAC) can handle this dent to their net interest income (the money they make on loans minus what they pay on deposits). Regional banks, on the other hand, do not have the same financial capacity. According to the Federal Reserve, total deposits at U.S. banks fell $312 billion this past March. But the top 25 largest banks gained $18 billion while the rest of the field lost $212 billion. As we saw when the Fed began its historic rate-tightening cycle last March, banks were able to charge more for loans and keep deposit rates relatively unchanged. But that is because pandemic stimulus led to a surge in consumer deposits. Typically, banks have to raise interest rates on deposits to preserve customer balances in a rising-rate environment. During the pandemic, customers were so flush with excess cash it did not matter. That is not the case today. So far, we have had a total of nine interest-rate hikes, a banking crisis, and a depletion of consumer deposits due to higher inflation and costlier debt. Given the current rate-hike environment, rates on deposits are likely to surge higher. That has caused deposits to be highly rate sensitive, and it has led to a fall in customer loyalty. As a result, regional banks are becoming very strict with lending standards and tightening their purse strings because they do not have the cheap funding that low-rate deposits provide. It is unlikely that we will see another banking collapse like the one in 2008. The underlying factors causing financial distress are just too different. But there is no doubt that regional banks are facing massive amounts of pressure today – unlike anything we have witnessed over the past decade. The faster the Fed can loosen monetary policy and ease the burdens on banks, the quicker an economic recovery can come to fruition. European Markets closed mixed. Despite U.K. CPI coming in higher than expected with a 10.1% print equity markets reversed earlier losses to close mixed on the day. Even though Gilt Yields rose 11 basis points, the FTSE only closed lower by 0.1%. The Central Bank injection of liquidity continues to support Global Markets. In Asia, Apple opened its first store in India. The tech giant’s concerted mission to diversify its manufacturing and supply-chain operations away from China tell us that tech companies are not willing to take on the increased risk created by emerging economic blocs. Elsewhere, Oil fell 2.10% while Gold closed 0.3% lower after a volatile trading session.
For anyone following my Platinum Service it made 290 points yesterday and is now ahead by 1943 points for April after closing March with a gain of 6168 points, while finishing February with a gain of 3164 points, after closing January with a gain of 4687 points, while finishing December with a gain of 2054 points. November ended with a gain of 4789 points, while finishing October with a record gain of 9619 points, making 6660 points in September, after closing August with a gain of 2228 points, having made 2660 points in July, following a gain of 3371 points in June. The Service made 3651 points in May, after making 762 points in April, following a gain of 5883 points in March. The Platinum Service made an impressive 5324 points in February, after ending January with a gain of 3878 points, more than making up for December’s 932 points loss. Since I started this New Platinum Service in June 2015 it has averaged a monthly gain of over 1600 points. I have a YouTube Channel which contains recent interviews I have given This can be viewed by clicking HEREHERE Please subscribe to this for new interview notification
Equities
The S&P 500 closed 0.01% lower at a price of 4154.
The Dow Jones Industrial Average closed 79 points lower for a 0.23% loss at a price of 33,897.
The NASDAQ 100 closed 0.02% lower at a price of 13,088.
The Stoxx Europe 600 Index closed 0.11% lower.
Yesterday, the MSCI Asia Pacific closed 0.30% higher.
Yesterday, the Nikkei closed 0.18% lower at a price of 28,606.
Currencies
The Bloomberg Dollar Spot Index closed 0.1% higher.
The Euro closed 0.1% lower at $1.09621.
The British Pound closed 0.1% higher at 1.2433.
The Japanese Yen fell 0.5% closing at $134.75.
Bonds
Germany’s 10-year yield closed 2 basis points higher at 2.51%.
Britain’s 10-year yield closed 11basis points higher at 3.86%.
U.S.10 Year Treasury closed 3 basis points higher at 3.61%.
Commodities
West Texas Intermediate crude closed 2.10% lower at $79.10 a barrel.
Gold closed 0.3% lower at $1994.10 an ounce.
This morning on the Economic Front we have German PPI at 7.00 am, followed by Euro-Zone Trade Balance at 10.00 am. Next, we have the Minutes from the ECB Meeting last month at 12.30 pm. This is followed by U.S. Weekly Jobless Claims and the Philly Fed Manufacturing Survey at 1.30 pm. At 3.00 pm we have Existing Home Sales and Euro-Zone Consumer Confidence. Finally, we have a speech from Fed Member Bowman at 8.00 pm
Cash S&P 500
My S&P plan worked well as the market tested my key 4112/4127 support level by hitting my 4127 initial buy level. Subsequently, the S&P rebounded 25 Handles enabling me to cover this position at my 4144 T/P level and I am now flat. The VIX crush saw the 5 EMA again saved. There is no doubt that investors will do everything in their power to hold last week’s low. My game plan has not changed. Positive seasonality coupled with Central Bank interventions will keep me on the buy side unless we break and close below 4100. I will continue to be a small seller into rips until we get the Fed Meeting next month. We know that just seven S&P stocks have been driving 90% of the S&P gains for 2023. We still have earnings to noodle through and we may get some negative surprises here but none of note so far. Today, I will again be a seller from 4172/4187 with the same 4202 ‘’Closing Stop’’. It is clear that the S&P has strong support from 4110/4125. I will leave my buyer on any dip to this area with the same 4099 ‘’Closing Stop’’.
EUR/USD
I am still flat the Euro has the market again fell shy of yesterday’s buy range before rallying 50 points off its 1.0917 low print. I am still flat. I will now raise my buy level to 1.0830/1.0900 with a higher 1.0765 ‘’Closing Stop’’. I still do not want to be short the Euro at this time.
June Dollar Index
No Change. I am still a buyer on any dip lower to 100.70/101.30 with the same 99.95 ‘’Closing Stop’’. I still do not want to be short the Dollar at this time.
Cash DAX
The DAX continues to hover below all-time highs. I am still flat. Even though the DAX is severely overbought and looks to me as a market that needs a correction, I am reluctant to chase the market lower. Therefore, I will leave my 16020/16120 sell level unchanged with the same 16205 ‘’Closing Stop’’. If I am taken short, I will have a T/P level at 15940. Given how overbought the DAX is trading I still do not want to be long the market at this time.
Cash FTSE
Even though Gilt Yields have risen 50-basis points over the past 10 days, the FTSE continues trade in a narrow range, below its February all-time high. I am still short at an average rate of 7885 with the same 7830 T/P level. I will leave my 7975 ‘’Closing Stop’’ unchanged. If any of the above levels are hit I will be back with a new update for my Platinum Members.
Dow Rolling Contract
The Dow missed yesterday’s 33750 buy level by 50 points before having a nice 150-point rally into the close. I am reluctant to chase the market higher, leaving my 33500/33750 buy level unchanged with the same 33345 ‘’Closing Stop’’. Until the Dow breaks and closes below its 50-Day Moving Average (33102) I have no interest in having a short position.
Cash NASDAQ 100
The NDX hit a low at 12970, missing my initial 12930 buy level before having a nice 120-point rally. I will now raise my buy level to 12830/12980 while leaving my 12695 ‘’Closing Stop’’ unchanged. I still do not want to be short the NDX at this time.
June BUND
The Bund hit my initial 133.20 buy level before having a small rally into the close. I am still long, and I will continue to add to this position on any further dip lower to 132.40 with the same 131.85 ‘’Closing Stop’’. I will now lower my T/P level to 133.70. If any of the above levels are hit I will be back with a new update for my Platinum Members.
Gold Rolling Contract
My patience paid off in waiting for Gold to trade lower. Gold hit my 1971 buy level before rallying to my too tight 1983 T/P level and I am now flat. Today, I will again be a buyer on any dip lower to 1960/1975 with a higher 1949 ‘’Closing Stop’’.
Silver Rolling Contract
Unfortunately, the sell-off in Silver hit a 24.65 low print, missing my initial 24.40 buy level before having a nice rally into the New York close. I will now raise my buy level to 24.10/24.90 with a higher 23.25 ‘’Closing Stop’’.
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