Bank Earnings Up Next: Time to Take a Look at the Regional Banks ETF
Michele Schneider | Jan 09, 2024 12:47AM ET
Starting with the Jeffries Group reporting on January 9th, by Friday we will see Bank of America (NYSE:BAC), JP Morgan (NYSE:JPM), Wells Fargo (NYSE:WFC), and Citigroup (NYSE:C) as well as a few other banks report earnings.
In my 2024 Outlook and this Year of the Dragon, Raymone Lo, in his analysis for 2024 he writes, “The Dragon is considered a ‘Star of Arts.’ The industries that will perform better in the Year of the Dragon will be industries related to Metal elements and Wood elements. Metal industries are banking”
Hence, one can assume that bank stocks, which already started off the year extremely well, have the potential to shine.
However, we know that assumptions can be tricky.
There are those who still believe credit issues with Regional Banks could put pressure on the financial markets.
“U.S. regional banks have a tougher road to growing profits in 2024 as they face pressure to pay more to depositors versus larger peers while demand from borrowers stays subdued.
With the outlook for interest rates more uncertain, regional lenders' earnings will also be restrained because they are tied into securities holdings that are losing money on paper instead of making loans or investing in higher-yielding assets, said analysts.” Saeed Azhar
With KRE into strong resistance on the monthly charts, what should we be looking for this week?
S&P and Moody's (NYSE:MCO) Investors Service cut credit ratings and revised outlooks for a slew of U.S. banks in recent months on the heels of the Silicon Valley Bank collapse reminiscent of 2008. Both agencies warned that funding risks and weaker profits will likely test the sector's credit strength.
This is why watching the chart of KRE could be important.
While big banks prospered after the regional bank debacle, we know that more stress could be yet another pick-up stick for the economy, the Fed policy on rates and the stock market.
On the monthly chart, 54.00-55.50 is major resistance using the 23-month moving average (blue) and the 80-month MA (green).
That price level also corresponds to the “scene of the crime” from last March.
Ideally, bulls should feel safer in all the bank stocks if KRE can clear that resistance.
And we don’t want to see KRE fail 50.00 once earnings are reported.
I almost gave our Prodigal Son (yes in the economic modern family) up for dead.
Get The News You Want
Perhaps it been more comatose.
Regardless, we shall know soon enough as earnings, support, resistance and the 6-month calendar range all align.
h2 ETF Summary/h2- S&P 500 (SPY) 480 all-time highs 460 underlying support
- Russell 2000 (IWM) 195 pivotal 180 major support
- Dow (DIA) Needs to hold 370
- Nasdaq (QQQ) 390 major support with 408 resistance
- Regional banks (KRE) 47 support 55 resistance
- Semiconductors (SMH) 170 cleared with this sector back in the lead
- Transportation (IYT) Needs to hold 250
- Biotechnology (IBB) 130 pivotal support
- Retail (XRT) 70 now key and pivotal
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.