Regional Banks – The Prodigal Dunce

With the Russell 2000 breaking out over the 50 and 200-week moving averages, the market looks like blue skies, right?

Retail (XRT) ran to just over $50.00. Sister Semiconductors (SMH) rocked to another new all-time high. Transportation (IYT) passed the critical test at the 200-WMA. Biotechnology (IBB) consolidated over the 5-year breakout.

But our Prodigal Son Regional Banks? Well… perhaps not all is lost.

Regional Banks (KRE) are in a bearish phase. The sector is having 2 inside weeks. And that makes it easy. A move/hold over 38.70 should be followed for a possible run-up, as shorts are plentiful. It could also mean that the sector believes there will be a stimulus package passed. By contrast, a move/hold below 36.80, regardless of the lofty prices elsewhere, is something I would take as fair warning.

  • S&P 500 (SPY): 325.50 now pivotal support; 332.58 a must-gap to fill
  • Russell 2000 (IWM): 149 key support, took out June 8th highs.
  • Dow (DIA): 270 now pivotal
  • Nasdaq (QQQ): Another low-volume day, so 270 key
  • KRE (Regional Banks): See commentary
  • SMH (Semiconductors): 165-168 pivotal support as it is over an ascending channel
  • IYT (Transportation): 179-180 now key support
  • IBB (Biotechnology): 142 resistance, 136 support
  • XRT (Retail): 50.00 now pivotal
  • Volatility Index (VXX): Inverted hammer doji – that’s a head’s up
  • Junk Bonds (JNK): 105.30 key support
  • LQD (iShs iBoxx High-Yield Bonds): 137.75 support to hold

Mish Schneider

Director of Trading Research and Education