Bank earnings could go a long way to impacting the broad market in a big way this week. Wells Fargo, Goldman Sachs, Bank Of America, JP Morgan, Morgan Stanley all announce earning the next couple of days.

As these earning announcements are to take place, the Bank Index (BKX) finds itself facing a key breakout test.

The index remains inside of bullish rising channel (1), as it has created a series of higher lows and higher highs over the past 8-years.

The index has little to brag about over the past 20-months, as it has created a series of lower highs and lower lows inside of falling channel (2). This bearish divergence with the broad market sends a concerning message to the overall market.

The index currently finds itself in a tight jam between 8-year rising support and a 20-month falling resistance at (3).

If banks would succeed in breaking out at (3), they would send a quality to this lagging sector and the broad markets.

What banks do at (3), will send an important message to this key sector and the broad market over the next few weeks!

The ole saying “So Goes The Banks, So Goes The Broad Markets” looks to be in play at this time!

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