One of the more noteworthy developments in recent days has been the move in bank stocks, which fell broadly on Wednesday amid growing concerns that the recent Republican electoral losses could hinder the party’s push to reform the U.S. tax code. They have also been pressured by a flattening yield curve. The spread between the two and the 10-year U.S. bond yields hovered around 70 basis points, its lowest level in a decade. A flattening yield curve is sometimes the precursor of an inverted curve, which has been a recession warning.
The SPDR S&P Bank ETF (KBE) fell 0.67 percent Wednesday, bringing its YTD gains down to just 1.7 percent, underperformed the S&P by a wide margin. Now the question is whether recent weakness is a pause that refreshes or it’s a beginning of something worse? Below is an update look at a trade in KBE.
The graphic below is from our “U.S. Market Trading Map”, show the near-term technical bias and trading ranges. As shown, the underlying is in a short-term bullish trend when the price bars are painted in green. The underlying is in a short-term bearish trend when the price bars are painted in red.
Chart 1.1 – SPDR S&P Bank ETF (weekly)
Our “U.S. Market Trading Map” painted KBE bars in red (sell). After a strong run of outperformance since late 2016, KBE peaked in March and bounce back and forth within the 40-47 trading range. This week’s downside follow-though confirmed…Click here to read more.
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