Category: Banks

Bank index BKX may be forming a lower high

As signs continue to build warning of instability in equity and financial markets this autumn, we observe that the index of major U.S. banks is lagging in comparison to benchmarks such as the S&P 500.

BKX: Large banks may lead equities downward

The banking sector has not kept up with the overall recovery in equities since the 2008-2009 crash, and that is even more true for the 25 large financial institutions that are represented in the KBW Bank Index (symbol BKX). While the substantially broader index of regional banks put in a higher high at the end of 2015, BKX put in a lower high. Developments during the next few months should clarify whether this divergence is a bearish signal for the financial sector and for equities generally.

KBW Bank Index (BKX) 2016-04-17

The banks have been weak compared to broader indices but at a key point if an impulse down from the highs is to be achieved.

Broader markets are probably still waiting on the bank indices

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As we implied in the October 15 post, it’s unlikely that there will be much selling in the broad stock indices until the bank indices have completed their rising patterns. The charts below give an idea of what to expect with the KBW Bank Index (BKX) and the broader NASDAQ Bank Index (BANK).

Update on the bank indices

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As we have said elsewhere, it will be important to watch the bank indices this year and next for clues about what the larger equity markets are doing.