Regional bank woes, volatility, bitcoin rubicon: Market Takeaways

And let's start off with those banks. My first uh item is Banks Spook stocks.

And that was where the trouble was this morning. a couple of regional bank uh players earnings announcements, you know, we got a bunch of them this week. They happen to disclose some fraud and I believe they were both on the same issuer. There are some other issues with one was with an auto subprime lender recently, and you put them together. You have maybe four or five of these things and maybe there's trouble, there's a little bit of smoke, but certainly not a panic.

And you can see that in the Dow here. We're only down about 6 7 tens of 1%. Nasdaq down half a percent, S&P 500 similarly, but what gets interesting is when you take a look at the Russell 2000, that was down 2% and another small cap index I like to track track, the S&P 600 down uh quite a bit less than that, only one and a quarter percent.

The difference between these two indexes, Russell 2000 has unprofitable companies in it, S&P 5 600 does not. And so you put that together with uh the trouble in the regional banks.

And this is our sector heat map by the way. This is for large caps, XLF down almost 3%. But let me get to this. Here we go. Here are regional banks. and you see a lot of dark red here and uh some of the key players, Zion was down what? Uh 13%, WAL, that's Western Alliance down 10-11%. And so, this might be a one-off, but I think there's uh a couple of things that kind of come together now, and for that, we're going to take a look at some other markets.

Yeah, I wanted to ask you, did you see this bleed into other markets?

Exactly. So, if we take a look at the VIX and also rates, that helps complete the picture here. So first off, let's take a look at the VIX. And if you'll recall last Friday, we had a little bit of a scare with respect to China and tariffs, and we saw the VIX jump up to 20. and you can see clearly right now, it's at 25. So that's higher.

Let me just go back 10 days and show you, this is what happened last Friday right in here. and what I was noting all week is that the VIX was not coming back down. The VIX

is really an institutional play. It's 30-day options in the S&P 500. This is not where the retail players dance. This is an institutional large player thing. And so what they were saying is there might be some more trouble out there. So we're going to stay uh a little bit less risk or more risk averse than we would otherwise. So the market was primed.

You put that together with the fact that we have we are in October, that's when we see these seasonal Vix spikes. Um, we do we have seen a lot of crashes historically. Doesn't mean that we have to get a crash this time around, but again, the market was primed. Then, you have the 10-year T note yield down seven basis points. So that means uh yesterday it was at 4.05%.

Let's take a look at a one-year chart. What we see is that currently, we are now at the lowest levels in about a year. And in fact, you'd have to go back to last October, September before Trump was elected to find lower rates. And if we show the two-year, uh that's indeed what we find. And what happened last September was the Fed started cutting rates.

And so when they did that, they were everybody was scared uh because the long end shot up after that. Trump got elected and then it shot up even more to about 5%. So everybody was worried about long-term rates. Well, now we've got a kind of a flip of the situation where falling rates is suggesting to people, well, maybe there's a little recession risk. Gets back to that canary in the coal mine.

So put it all together. There's a little bit of smoke here, but not a blazing fire.

Did we see an impact on crypto today?

Oh, you bet. Just a little bit. Um and it's interesting, great timing because I just did a a hit on Bitcoin seasonality this morning and how bullish it is this exact time of year. And so of course Bitcoin fall Bitcoin falls, but it is now at the Rubicon.

And what's the Rubicon? That is the lower end of its current trading range going back about three months. And so let's get a Bitcoin chart up here. There we go. This is two years. Let me just dial this down to six months. And you can see here over the last three months, I've been saying this just about every day too, Bitcoin has been in a trading range. It pokes above sometimes, it pokes below sometimes. Lots of fake out in Bitcoin, but the bottom line is 108 to 125 was my current range.

So you'll note we are just below that right now. What I'd like to see here is maybe a little bit more dip. We could go as low as 105,000, but then I want to see it quickly rise back up and start rallying. So by Monday, I want to see I want to see Bitcoin at 110 ideally, even if it goes down to as low as 105.

So put it all together, we have a little bit of risk off, bleeding into not only stocks and other markets, but also crypto and that's what we're seeing right here. So Bitcoin's kind of at that big inflection point.

Finally, you mentioned how bonds rose. Gold did too today, by the way.

Gold, gold. I mean, what do we say about gold here? Let me put the year to date on so we can see up 63%, 4300. I mean, I remember just a month ago we were talking about, what was that? 3500? Uh what's interesting about gold is that gold volatility rises with gold.

So here's the gold VIX. and yes, there is a gold VIX. Uh it has just exploded over the last month. So, the gold rally, I'm going to go back to gold futures getting a little bit extended. I think it's even more extended than it was in 1980 and that was a huge run. Uh so it wouldn't be surprised if it pauses, but you don't want to call the top in a parabolically oriented asset like this.

All right, thank you, mate. Appreciate it.

You bet.