Bank stocks have struggled since topping out in March, hampered by a persistent downturn in commercial lending as well as low inflation that has forced the Federal Reserve to delay its aggressive rate hike schedule. Sector funds have now dropped into intermediate support, signaling possible breakdowns that bring into play deeper support at November 2016 breakout levels.
The sector got bought aggressively in November and December, underpinned by high expectations that the business-friendly Trump administration would institute tax cuts and deregulatory actions to generate higher U.S. growth rates. The first nine months of the new presidency have failed to achieve those goals, inducing many shareholders to dump positions and pursue profits in more rewarding venues, including big tech. (See also: How Trump Can Unilaterally Deregulate Big Banks.)
The reality of an aging business cycle is also hitting home, with the U.S. now engaged in the ninth year of an economic expansion. In addition, geopolitical tensions are generating a risk-averse environment that is forcing large chunks of institutional capital to rotate out of growth plays and into more defensive instruments, including bonds and precious metals. In turn, this global shift could finally end the long expansion and drop the economy into a recession.
Bank stocks have settled at range support and could break down, testing post-election breakout levels. …read more
Read more here: Bank Stocks Nearing Intermediate Breakdowns
Category: KBE, JPM.WFC