— Shane C. Murphy (@murphycharts) October 23, 2020
Today’s Chart of the Day was shared on Twitter by Shane Murphy (@murphycharts). It’s a daily candlestick chart of the Regional Banking ETF, $KRE, over the past year. Regional Banks broke above their 200-day moving average this week for the first time since the crash began in February. $KRE is up more than 19% in October, putting it on track for its best month since 2016. This is happening as the US 10yr-2yr Treasury yield spread steepens to its widest level in more than two years. This yield spread is often thought of as a barometer for Banks’ profitability. Regional Banks make the majority of their profits from lending. When the 10yr-2yr yield spread steepens, Banks can make more money on loans. If the spread continues to steepen, it would be a tailwind for Regional Banks. Any improvements from Regional Banks would be a bullish development for risk assets and the broader market.