Long-term market breadth has been rising for nine days. That usually takes most stocks in the same direction. After all, if a stock isn’t rallying when it has the entire market on its side, when is it going to rally?
So, consider the banking sector…
JPM, BAC, GS, WFC, DB, KBE (the ETF for the sector) are all falling while breadth is positive (see the rising green in the middle of each chart below), and now all of these stocks have broken support falling out of their respective consolidations (see the blue boxes on the charts below).
Don’t those boxes look a lot like coffins? So is this out of the coffin and into the grave like “out of the frying pan and into the fire”?
Enough fiddling around.
If you’re a bull this is not a sector you want to see lagging, let along falling apart. So here’s the heads-up, they’re likely going down.
(click on the chart for a larger view)
Update April 3, 2107:
After eight days down in a row on the Dow, today’s bounce was nearly inevitable. Eight days in a row is a lot when four is most often the magic number to buy for a bounce.
And as inevitable, an oversold sector is likely to bounce with it. In this case, the financials – that is, the banks — GS, leader to the downside, as well as JPM, BAC, and even the deadest dog of the bunch, DB, which has some serious fundamental problems all its own (besides being the last lender to loan to Donald Trump).
Most likely this bounce will continue in a rise to resistance, most likely to bottom of the boxes indicated on the chart below at the point the stocks fell through support going into this recent decline.
If they turn over again with lower highs sometime soon…say, next week…that will not be good for any bull market going forward. In other words, head up the bull might actually be stumbling.
(right click on the chart for a clearer view)
Since market breadth turned down with conviction on March 3, the banks (like much of the general market) have been defying an impending decline. But that defiance appears to be over as they have been falling for the past few days, and that fall has accelerated.
GS is now down 6.7%, BAC 8.8% and JPM 4.7%.
GS, a bellwether stock, has how retraced its entire advance since early December. That is not a good sign for the continuation of this bull market, but will see how that weakness plays out in the fullness of time.
(right click on chart for a larger view)