Did The Banking Sector Peak? Here Are The Implications

James Bartelloni

The financial and banking sector has been hard hit over the past month. But it shouldn’t be surprising given the recent stock market decline and stress in credit (i.e. high yield land).

It’s hard to believe it was January 2, 2015 when I last posted about two very important patterns developing in the banking indices. Over a year ago, the market was already sending signals about a coming banking sector peak and decline…

The banking sector peak came in July of last year for both the Financial Sector ETF (XLF) and the Banking Index (BKX) – both on target with our pattern analysis. And after recovering most of the losses from the August stock market swoon, the banking sector peaked again and has turned lower in 2016.

This type of price action is concerning to say the least.  A banking sector peak have implications for the global economy, etc…

Below are the updated charts of both the XLF and BKX. My biggest fear is that we just finished classic A-B-C corrective waves on both XLF and BKX and we’re going to take on the 2009 lows in the banking index.

Let’s hope not… the coming structure of the price action will be critical though.  And that trend line on the BKX banking index needs to hold (around 55).

$XLF Financials Sector ETF Chart

xlf chart financials sector peak and decline january 27

$BKX Banking Index Chart

bkx index chart banking sector peak with lower price targets january 27

It’s also worth noting that Deutsche Bank (DB) broke to new lows earlier in the week. The world’s largest holder of financial dynamite (i.e. derivatives), sure looks like a canary in a coal mine chart – kind of similar to Lehman before it went into oblivion. Hang onto your hats and remember to stay disciplined.

Thanks for reading.

 

Twitter:  @BartsCharts

Author does not have a position in mentioned securities at the time of publication. Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of any other person or entity.

 

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