The banking sector has been put through the ringer since the March selloff. While the market has rallied since then, KRE (Regional Bank ETF) still looks in need of help.
One thing to note is that JPMorgan and Goldman Sachs reported Q3 earnings stronger than expectations. While JPM and GS are not part of the KRE ETF, this does give a hopeful view of more Q3 earnings to come.
Above is a daily chart of KRE with our RealMotion Indicator.
Real motion is a momentum based indicator, which, in this case, shows a partial improvement as the 50-DMA crossed over the 200-DMA before the price did on the chart. It is still under the 0.00 black line, showing it still has an overall negative momentum. This makes it evident how important it is for the price to clear resistance at the $40-41 level and hold.
We know the Fed will keep rates low til at least 2023, giving room for people and businesses to borrow money at some of the best rates possible. What is still a factor is if and when new stimulus money comes into play. Will it play a role in fresh business debt and consumer loans? Or does the hope of a vaccine hold more weight, as businesses will feel more secure going forward knowing they have a more stable environment?
There looks to be a road to recovery in the works, whether it be through the vaccine or stimulus, but for now focusing on the earnings will give us the first light into what to expect in this sector.
Technically, KRE is in a Recuperation phase as long as it holds the 50-DMA or 38.21. A move over 41.00 would reverse a long-term negative trend going back to the beginning of 2020.
- S&P 500 (SPY): Broke 350.50; we could now see a move to 343
- Russell 2000 (IWM): 159 next support
- Dow (DIA): 282-283 next support
- Nasdaq (QQQ): Held 292 just where they needed to and have continued to do so
- KRE (Regional Banks): 38.20 the 50-DMA support
- SMH (Semiconductors): Held up better with 183 support
- IYT (Transportation): Close green, leaving the impression that this is a gentle correction after a big move up
- IBB (Biotechnology): 140.50 support
- XRT (Retail): With a possible reversal top pattern if closes Thursday under 53.86
Director of Trading Research and Education
Assistant Director of Trading Research and Education