U.S Equity Markets closed basically flat following a quiet profitable trading session for my Platinum Service. The recent bank failures have left markets and investors scrambling for answers. They want to know if the recent turmoil in the banking sector a one-off event was, or if there are choppier waters ahead. As we saw, the fastest rate-tightening cycle in four decades left regional banks facing immense pressure from shrinking margins and declining investment valuations. It ultimately ended in the collapse of the most vulnerable among the regional banking sector – Silicon Valley Bank and Signature Bank (SBNY). In turn, depositors began fleeing other community and regional banks for the perceived security of major money centre banks, such as JPMorgan Chase (JPM), Wells Fargo (WFC), and Citigroup (C). Consumers realised that while the Fed was hiking rates – making servicing debt and borrowing money more expensive – they were not receiving the benefits of higher rates on their interest-bearing bank accounts. Regional banks realised that declining deposit volume was too big of an issue to ignore. The profit lost by declining deposit balances would be much more painful than the profit lost by raising interest rates on deposits. As I will explain, this poses a serious threat to the standing of many regional banks moving forward. Last week, major banks reported earnings that exceeded expectations thanks to the surge in deposits from folks fleeing smaller, regional banks. (It is important to note that these big banks are not necessarily paying high deposit rates. They just happen to be higher compared with smaller banks.) This will make the next few weeks that much more important as regional banks like M&T Bank (MTB), Trust Financial (TFC), and Citizens Financial (CFG) report earnings. We might finally get a glimpse into just how bad or prolonged this regional banking crisis could be. Mike Brauneis, managing director of global business-consulting firm Protiviti, described this earnings season as “the most critical, sensitive quarter [regional banks are] ever going to report in.” And, again, two things are weighing heavily on regional banks right now, deposits and the Fed’s interest-rate hikes. You see, according to the Federal Deposit Insurance Corporation, U.S. bank deposits make up roughly $18 trillion. That is critical to the funding of banks as they use deposit balances to fund higher yield loans. It also serves as a key source of financial well-being for households and businesses. When regional banks lose deposits at this magnitude it begins to cut into their lending ability. Consequently, this severely impacts economic activity because according to the Federal Reserve, small banks (classified as banks outside the top-25) originate over 67% of all commercial real estate loans and over 37% of total loans. Now, changes in the Federal-Funds rate (as determined by the Federal Open Market Committee) typically pass through to changes in interest rates on deposits. That means if the central bank raises the Federal-Funds rate, banks should increase what depositors earn on their balances. Within the S&P Index 7 of the 11 sectors finished lower. European Markets rose. ECB President Lagarde warned that the emerging de-globalisation into competing economic blocs poses severe risks to the central bank and its peers. German Investor Sentiment fell further in April according to the ZEW Institute as concerns over sticky inflation and banking sector uncertainty remain elevated. U.K Wages rose faster than expected in March raising expectations of further rate hikes from the Bank of England, while the Unemployment rate rose in the first quarter to 3.8% – the highest since Q2 2022. In Asia, BoJ Governor Ueda reaffirmed the central bank’s intent to keep current government accords unchanged ahead of his first policy meeting next week. China’s economy grew more than expected in the first quarter of the year, raising hopes that the recovery is on track to meet the lofty expectations of greater than 5% GDP growth in 2023. Elsewhere, Oil closed flat while Gold rose 0.3% after a quiet trading session.
For anyone following my Platinum Service it made 381 points yesterday and is now ahead by 1653 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 0.09% higher at a price of 4154.
The Dow Jones Industrial Average closed 10 points lower for a 0.03% loss at a price of 33,976.
The NASDAQ 100 closed 0.03% higher at a price of 13,091.
The Stoxx Europe 600 Index closed 0.35% higher.
Yesterday, the MSCI Asia Pacific closed 0.23% higher.
Yesterday, the Nikkei closed 0.51% higher at a price of 28,658.
Currencies
The Bloomberg Dollar Spot Index closed 0.4% lower.
The Euro closed 0.4% higher at $1.0971.
The British Pound closed 0.3% higher at 1.2426.
The Japanese Yen rose 0.3% closing at $134.05.
Bonds
Germany’s 10-year yield closed 1 basis points higher at 2.49%.
Britain’s 10-year yield closed 9 basis points higher at 3.75%.
U.S.10 Year Treasury closed 1 basis points lower at 3.58%.
Commodities
West Texas Intermediate crude closed 0.04% higher at $80.38 a barrel.
Gold closed 0.3% higher at $2002.10 an ounce.
This morning on the Economic Front we have U.K. CPI, PPI and the Retail Price Index at 7.00 am. Next, we have Euro-Zone Current Account at 9.00 am, followed by CPI and Construction Output at 10.00 am. At 11.35 am we have a speech from the ECB’s Lane. This is followed by U.S. MBA Mortgage Applications at 12.00 pm. Finally, we have a 20-Year Treasury Auction at 6.00 pm and the Fed’s Beige Book at 7.00 pm.
Cash S&P 500
Volatility has been crushed in April. Keeping over 3000 individual stocks with over $30 trillion in market cap contained in such a narrow band of volatility is quite a feat. The VIX closed lower last night- again with a 16 Handle. One thing that amazes me is the fact the VIX is so low we are not seeing any selling emerge. Another concern is the fact that we have four ‘’Open Gaps’’ below. It would have been ‘’five’’ until yesterday’s gap was filled mid-afternoon. I will continue with my strategy of selling rips. The S&P has strong resistance at its Monthly 20 MA at a price of 4173, which was yesterday’s high. Above here we have huge resistance at the Weekly 200 Moving Average at 4210. Any move to this area will see me put on a macro short position and would tie in with Fed Meeting in early May. When I compare April 2022 to this year there are stark differences despite the S&P trading at the same level as 12 months ago. Last year the two-year was trading at 2%, now it is at 5%. 12 months ago, the Earnings Per Share was $200, now it is $172 and going lower. The main reason for prices at the same level is the injection of liquidity from the Fed and other Central Banks. Which effectively is QE. Yesterday my S&P plan worked well as the market traded higher to my 4171-sell level before trading lower to my 4157 T/P level and I am now flat. 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 4112/4127. I will leave my buy level unchanged with the same 4099 ‘’Closing Stop’’.
EUR/USD
I am still flat the Euro has the market fell shy of yesterday’s buy range before rallying 50 points off its 1.0920 low print. I am still flat. Ahead of the Fed’s Beige Book I will leave my 1.0800/1.0870 buy range unchanged with the same 1.0725 ‘’Closing Stop’’.
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
I am still flat the DAX as the market traded in a narrow range yesterday. As I am short the FTSE I will now raise my sell level again to 16020/16120 with a higher 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
Just before the New York close the FTSE hit my second sell level at 7920 for a now 7885 average short position. Since the Central Banks added liquidity five weeks ago, the FTSE has now rallied over 700 points for a near 10% move. This is insane as fundamentals are again ignored. The FTSE is now less than 100 points off its all-time February high. Nobody will ring a bell when the top is in but in my opinion, we are getting closer. I will now raise my T/P level on this position to 7830 while leaving my 7975 ‘’Closing Stop’’ unchanged.
Dow Rolling Contract
My Dow plan worked well as the market traded lower to my 33790-buy level before rallying above 34,000. This move higher enabled me to cover this position at my revised 33890 T/P level and I am still flat. Today, I will again be a buyer on any dip lower to 33500/33750 with a lower 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
My NDX plan worked well as the market rallied to my 13130 T/P level on last week’s 13020 long position. I am now flat. Today, I will again be a strong buyer from 12780/12930 with a lower 12695 ‘’Closing Stop’’. I still do not want to be short the NDX at this time.
June BUND
The Bund traded in a narrow range for all of yesterday’s session. Given the lack of interest to take the Bund higher I emailed my Platinum Members to exit any long position at 134.06 and I am still flat. The Bund has support below from 132.40/133.20 where I will be an aggressive buyer with a 131.85 ‘’Closing Stop’’.
Gold Rolling Contract
No Change. My only interest in buying Gold is still on a dip lower to 1955/1972 with the same 1939 ‘’Closing Stop’’.
Silver Rolling Contract
No Change. I am still an aggressive buyer on any dip lower to 23.70/24.40 with the same 22.95 ‘’Closing Stop’’.
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