Any discussion of the banks and greater Financials sector has to include a discussion about interest rates. I believe that long-term interest rates will eventually work higher and if that results in a steepening yield curve (with the Fed pinning down the short end) so much the better for the banks as long as the economy holds up.
In other words, if a cyclical inflation phase is out ahead I’d expect the banks to participate as a component of a diversified ‘inflation trade’ (along with commodities, EMs, precious metals, etc.). Valuations assigned to banks are depressed relative to other parts of the US stock market and I don’t think it is a coincidence that this has come under the pressure of post-Op/Twist yield curve flattening trend.
In looking at the banks now, the caveat remains the same… I question my timing because for the last 6 months the yield backdrop has not been particularly favorable for the banks.
Note: I will probably not buy C but will watch it along with other banks/financials for macro signals.
Anyway, NFTRH+ does charts and in looking through some of the piggies, I found the C chart pretty interesting. It is breaking through the neckline of a pattern not unlike the bullish looking one we are watching that is inside the SPX (bearish) reverse symmetrical triangle, raising the question of which of those patterns will win out.
C’s daily chart shows an intermediate uptrend with the SMA 50 but still down trending SMA 200. If this breakout holds and eventually turns the SMA 200 up this thing could go much higher (if the right macro backdrop engages). Target would be around 94.
Here is a cleaner weekly view that shows the resistance point to be taken out before getting too bullish. If one were to buy C I’d say to wait for it to clear 74 and log a higher high. It would still be a significant way to 94.
For perspective, the monthly chart shows how far this pig fell during Armageddon ’08. I think a combination of the stink from that crisis and Operation Twist’s yield curve flattener are significant contributors to this.
Final note: Notice how RSI & MACD are positive (green) on all 3 time frames. Can’t hurt the case.
I know a gold bug like me is not supposed to be highlighting US banks, but it is what it is. Insofar as you may be interested in the sector these charts are provided for your review.
A reminder that chart based NFTRH+ updates are technical trade setup ideas, which may not be revisited as the technical parameters are already noted. These updates are meant as a starting point for your further research if interested. I will not personally buy every item highlighted and will sometimes sell (ref. Trade Log) any item that I do buy below target (assuming I’ve not stopped out or sold for some other reason) as I often do. Also please be aware that I am not a fundamental stock analyst. Due diligence is your responsibility.
