1. Moving the markets

Judging by today’s rebound, it appears that traders and algos alike were no longer concerned with the state of the banking sector, nor if or when the Fed might shift into easing mode. None of it mattered, as sentiment maintained its bullish influence, with the S&P 500 reclaiming its 4,000 level—also helped by a calm bond market.

Never mind that the Fed’s gauge of financial stress has approached levels of concern, as ZH reported, but it seems that policymakers’ best hope will be that the current calm will prevail long enough to keep the economy from falling off a cliff.

In economic news, we learned that the Pending Home sales rebound slowed in February after a huge 8.1% surge in January.  

I enjoyed market analyst and charting guru Michael Lebowitz’ piece on clarifying that a Fed pivot (to lower rates) is not bullish, if history is any indicator. He states that since 1970, there have been nine instances in which the Fed significantly cut the Fed Funds rate. The average maximum drawdown from the start of each rate reduction period to the market trough was 27.25%, as his chart shows.

Makes me think of the old saying “be careful what you wish for,” something that traders should keep in mind rather than only focusing on the event, expecting that bullish times are here again.

The regional banking sector’s ETF KRE pumped, dumped, and pumped again, which is surely not a sign of certainty or directional clarity. A similar rollercoaster happened to the big banks with KBWB first tanking and then cranking.

The US Dollar limped sideways, while Gold slipped but stayed above its $1,950 level and within striking distance of again taking out its $2,000 resistance point.

With today’s ramp, our Domestic TTI climbed back above its long term trendline for the first time in 3 weeks. Please see section 3 below for details.

1. Moving the markets

Just like yesterday, climbing bond yields kept a lid on bullish sentiment, as the major indexes bounced around their respective unchanged lines before sauntering into red territory, where they closed with minor losses. The S&P and Nasdaq erased yesterday’s gains and never saw “green” during this session.  

There was no apparent driver on deck to keep the bullish theme intact and—despite traders looking beyond the banking crisis yet recognizing that on one hand the economy still shows some resilient growth but on the other could easily be pushed into a recession—buyers remained conspicuously absent.   

Regional banks took a dive, as hearings in Washington on bank failures offered nothing but more regulation, more laws, tighter credit, and no bailouts, as ZH reported. As a result, the regional banking index KRE dropped again, thereby wiping out yesterday’s rebound.

The US Dollar continued its 3-day down trend, which helped Gold to gain +1.06% on the day, as the precious metal found support at its $1,950 level.  

1. Moving the markets

Apparently, traders found some encouragement from last week’s modest advances, as well as the fact that we made it through the weekend without another bank collapsing, so they pushed equities moderately higher, but the results were mixed, as the graph above shows.

Never mind that Deutsche Bank (DB) and other fellow European bank shares took a dive on Friday, this morning all was well, and European stocks set the tone for a positive US opening.

While this does not mean the banking crisis has been resolved, far from it, it simply has been put on the back burner for the time being. The dominant reason is that Wall Street is still convinced that the Fed is bluffing and a pause or pivot may be in the near future, as the economy points to stagflation.

The reginal banking index ETF KRE managed to add 1.6%, while some of its components did much better, like First Citizens Bank, which soared over 50%. Helping this rebound was improved market sentiment based on irrational hope of policymakers getting a handle on these challenges. Yeah, right…

Traders conveniently overlooked the fact that bond yields surged, and rate hike expectations took on a hawkish tone, as ZH pointed out. The 2-year managed to recapture its 4% level, which it had surrendered 5 days ago.  

The US Dollar slid -0.26%, as did Gold, with its $2k level currently functioning as overhead resistance. Crude oil went on a rampage and added +5.40% for the session to close at $73.

Our Domestic Trend Tracking Index (TTI-section 3) has climbed again closer towards its long-term trend line. We are still in the neutral zone but will increase our equity holdings, should this dividing line between bullish and bearish territory be solidly broken to the upside.

Over the past two weeks, all attempts have been nothing but head fakes.