The performance of the Banks, has ripple effects on the overall economy and the markets. The Bank index lost almost 5% last week, while the 500 index gained .95%. Important pattern created in the Bank Index over the past 14 months? See below.
CLICK ON CHART TO ENLARGE
Bank Index may have created a “Head & Shoulders” topping pattern, with the head hitting the 38% retracement level, after the Financial challenges of 2008. Keep an eye on line (1) in the chart above, which has the potential to be the patterns “neckline.” The neckline IS NOT BROKEN at this time, does represent support.
Should support give way, banks might have a few more challenges on their hands!
CK,
Those ETF’s are inverse plays and should do well IF…
the pattern read is correct and IF the neckline is taken out.
Banks have been weak of late, yet in my opinion, it shows the broad market is pretty strong, since it has moved up without them.
Neckline breaks, the inverse etf’s should do pretty darn well.
Would the defensive plays be SEF and SKF (short financials 1x and 2x)?
KRS is short regional banking (1X)
Back in April I thought that banks would fall 50% from the Spring high before they found bottom. Lately I was wondering if I was out to lunch on that forecast. But if the neck line breaks … $30 seems doable. Maybe I’m still out to lunch?
Again, great job, Chris.
By the way, I love the funny pictures you add to your charts… 😉
Wolfstreet…
Will be an interesting week. I continue to supsect the action of the dollar will be the driving force. Banks are important, currencies are key right now, due to driving the prices of commodities and international equities.
DG…Thank you for the kind words…will try!
I’m looking forward to the wonders you will reveal this week Chris –
Keep up the great work!
dg
Hello Chris. Interesting emphasis on this TA test for the banks. From a big picture point of view, don’t you think this week shall lead to a short term pullback in the markets? Thks