The Easy Money is Over — Nick Santiago 5-24-23 #495

Daily Market Wisdom with Nick Santiago

1. Markets are in retreat mode again today. The debt ceiling debate continues to remain front and center. In my opinion, the debt ceiling debate is not the real issue. Everyone knows that the politicians will raise the debt ceiling and increase spending. That is how we got to $32 trillion in debt. The bigger issues are the banking crisis, war in Ukraine.
2. Bond yields have rallied higher recently. The 10-year note tested 3.76% before baking off a bit. The 2-year note which is the most important is around 4.31%. This is going to be very problematic should it test 5% again. That would force the Fed to continue raising the fed funds rate. At the moment, the fed funds rate is at 5% so they have a little wiggle room, but with this proxy war going on between the US and Russia it is not a recipe for lower yields.
3. Financial stocks are under pressure today. The Regional Bank ETF (KRE) is trading lower by 2.2% this morning. The weekly chart of this ETF still looks horrible despite the recent bounce. This is another major problem for the Fed, but so far since the bank failures began the markets have rallied higher. This tells me that they have thrown money at the system. US$ is going higher at 103.77.
4. Gold is trading down a touch today, but nothing terrible. The US Dollar Index has held up this week so that sometimes puts pressure on the precious metal. Either way, the pattern should still be watched closely for gold. The daily chart has some support around the $1940 area.
5. Bitcoin is trading lower by 3% today. It remains in a daily chart bearish consolidation pattern. That near term downside target on the futures is around the 25,000 area. The weekly chart is still holding up right now, but if that changes it will be lights out for Bitcoin.