🔮 Better than the Oracle? Our Fair Value found this +42% bagger 5 months before Buffett bought itRead More

Should the Market Worry About Regional Banks Sector?

Published 01/19/2023, 12:57 AM
Updated 07/09/2023, 06:31 AM

S&P Regional Banking ETF (NYSE:KRE) is a member of my Economic Modern Family.

With bank earnings in gear, this ETF measures the smaller banks-the ones where people living in more rural communities and smaller cities often go to borrow and save money.

KRE-Weekly Chart

Here is a passage from Mar. 22, 2022:

“We have and continue to use Mish's Economic Modern Family to successfully navigate through the pandemic and now, in 2022, we use its insights to guide us through a year that has three main overhead pressures: geopolitical stress from the current Russian/Ukraine war, inflation and, finally, rising interest rates.”

I quote that passage as one week later marked the high point of the S&P 500. And we all know what happened from there.

So, here we are in 2023, and the enthusiasm for a bottom remains high. Calls for a Fed pivot are relentless.

Yet, like Mar. 22, 2022, the Russia/Ukraine war persists, inflation, is cooling somewhat, but in some areas, forges on. And interest rates are still rising; the Fed has said nothing about a pivot.

By the way, it's Deja Vu, as the U.S. has a debt ceiling emergency in the midst.

I remember 2011. The political battle to delay the inevitable-raise the ceiling and print more money. Until everyone played nice, the market fell 20%.

That makes me wonder, is this why KRE has lagged and lives so dangerously close to a weekly chart breakdown?

First, the 6-month calendar range. The January high in KRE is 61.08, just under the 50-day moving average.

The 6-month low is 57.50, precisely on the 200-week moving average.

We love the calendar range this year because it lines up well with major moving averages. So, now KRE sits about the midpoint of the range.

A move under 57.50, and regardless of what the other members are doing, we will take that as a fair warning.

A move above 61.10, and we take that as a good sign and continue shopping.

However, this mid-range chop can wreak havoc, so tread lightly with patience until the range reconciles.

And, remember-always best to look at the weakest link in the family and the strongest member. KRE is the weakest.

So we ask, is this a temporary malaise or contagious with further illness on the horizon?

ETF Summary

  • S&P 500 (NYSE:SPY): Jan calendar range reset on day 1, and SPY fails the 200 and 50-DMA.
  • iShares Russell 2000 ETF (NYSE:IWM): It is In better shape than SPY but still a nasty reversal and must hold 180.
  • Dow Jones Industrial Average ETF Trust (NYSE:DIA): The ETF is back under the 50-DMA as industrials lose ground.
  • Invesco QQQ Trust (NASDAQ:QQQ): The ETF is sitting just under the 50 DMA and never cleared the 200-WMA.
  • Regional banks (KRE): The ETF led the way down and now must hold 57.50.
  • VanEck Semiconductor ETF (NASDAQ:SMH): The ETF is still holding key support at the 50-WMA, so we shall see.
  • iShares Transportation Average ETF (NYSE:IYT): 225 key support here.
  • iShares Biotechnology ETF (NASDAQ:IBB): The ETF is still the best sector with 132 critical support.
  • S&P Retail ETF (NYSE:XRT): 63 is the 200-WMA if the market is good, must hold.

Latest comments

Loading next article…
Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.