Banks Sputter After Hawkish Fed Raises Rates
In March we warned of continued Fed rate hikes. In May, we reported on more rate hikes and their potential impacton stocks. In August, the QT “time bomb” started ticking…
On Wednesday, the Fed raised rates for the eighth time since tightening started. But the KBE Bank ETF — which holds Bank of America and Citigroup among others — failed to rally.
This could be a sign of an alarming trend beginning to unfold.
On CNBC’s “Trading Nation,” equity strategist Matt Maley warned that even though the markets are rallying, the KBE Bank ETF hasn’t:
“The thing that concerns me is that not only has it been stuck in a sideways range as the market has rallied all year but now in the last couple of weeks it’s dropped below its 200-day moving average. This has been key support for the group,” Maley told CNBC’s “Trading Nation” on Tuesday.
You can see the dire trend Mr. Maley alludes to unfolding in the chart below…
After the Fed stopped Quantitative Easing (QE) back in October 2017, three critical revelations happened that can be seen in the chart above:
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- The KBE Bank ETF has dipped close to the 200-day moving average twice, but in recent months has been repeatedly dipping below the average.
- The KBE Bank ETF has rallied 3 times since October 2017, but each rally has been weaker and doesn’t maintain levels reached since 2017.
- The black arrows indicate each rally getting more “sideways,” and overall staying sideways after the 3rd rally.
This unfolding trend comes at a time “when things should be positive for the group,” according to Maley’s analysis.
At the time of this writing, all bank share prices in the ETF were still dropping, some over 2%. It’s “boom or bust” for the banks, according to the CNBC report.
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