Market Snapshot: Watch the Banks

Andrew Nyquist

Uncertainty, then certainty.  Huh?  V is for volatility!  Today, the markets are racing ahead on the heals of strong earnings reports, word of a temporary deal out of Europe, and back and forth rumors of domestic debt ceiling deals… interesting that the markets still get juiced up over bailouts, debt deals, and visions of QE, but I digress.

The S&P 500 (^GSPC)  is nearing overhead resistance, and should be overbought sometime next week (see chart below) — same goes for the proxy SPDR S&P 500 (SPY).  I expect the rally to chop a bit higher, but ultimately to turn lower in August.  Volatility is narrowing but indicating a creeping complacency.  Also of note is the action in the banks — see the chart of the KBW Bank Index (^BKX) below.  Like the S&P 500, it is nearing overhead resistance.  That said, an upside break of the downtrend line will go a long ways in neutralizing/stabalizing the markets.  For those looking for comparables, the proxy Financial Select SPDR (XLF) has a similar set up.

Until proven otherwise, the S&P 500 is in an intermediate trading range of roughly 1250 to 1370, with the 50 day moving average acting as support/pivot.  So long as we remain above the 50 day moving average (1310ish), the bulls will be charge.

(Chart note:  The purple line is the S&P 500 Volatility Index (^VIX).  This index tends to have an inverse relationship with the markets.  When volatility spikes, the markets usually head lower.  For more, click here).

Happy Investing.

 

Previously published as a blog by Minyanville.

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