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Retail and Regional Banks Will Call the Shots

March 6, 2023

Mish's Daily

By Mish Schneider

The 23-month moving average or a 2-year business cycle-is particularly important this year after a big up then down year-looms large.

Looking at Granny Retail, that business cycle not only leaves investors with the trading range resistance, it also shows how the Retail sector could be a harbinger of worse times this spring.

On the weekly chart though, Granny is still in the game holding both the 50 and 200 week moving averages.

The Real Motion indicator flashes a divergence, however. Momentum weakens while price is ok.

And the Triple Play indicator has Granny underperforming the benchmark.

So, the ever-important representative of US growth is stressed-albeit not broken.

Regional Banks or our Prodigal Son has a story as well.

As per the weekend Daily on the Economic Modern Fam , “Regional Banks (KRE) sit below the 50-WMA and noteworthy, below the 50-DMA. With folks not depositing money due to high credit card debt (AND HIGHER YIELDING OPTIONs LIKE T-BILLS), and with mortgage rates so high, it is no wonder our Prodigal Son struggles?”

The higher rates on T-Bills, CDs and other bank deposits have been attractive for consumers and businesses.

However, that is costly for the US banking industry, already experiencing a slowdown in lending.

With banks having to raise the rates for deposits, bank profits could fall.

And as we know, the Regional Banks character is called Prodigal Son for this very reason-first they (banks) hoard your capital and pay you very little interest, and then they come back asking for forgiveness.

In this case, should banks start to project larger unemployment and smaller profits, that could be the reason Fed either does a pivot or pause, or raises the inflation target from 2% up to 3%.

But we are getting ahead of ourselves.

Granny Retail and Prodigal Regional Banks are my key go to’s for this week.

Teetering on support, they could be just fine, and low risk buy opportunities.

BUT, if they fail support, take note!

If you missed it check out the Weekend Outlook with commentary charts and the important points taken from Big View on risk

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