Bullish Bank Stocks Are Charging Higher

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Monday started off this week slightly on the weak side, as key economic reports and scores of corporate earnings will hit the news. The three major indices each fell 0.3%.

But today may start higher after Netflix, Inc. (NASDAQ:NFLX) reported a surge in new members. That announcement was made after Monday’s close, when it said that its streaming-video service grew by 3.57 million new members in the September quarter. This was in contrast to the prior quarter when it had the weakest subscriber expansion in two years. NFLX jumped 20% in after-hours trading.

Aside from good post-hours news from NFLX, there was little to cheer about: The Empire Manufacturing survey for October and the Industrial Production /Capacity Utilization Report for September were worse than forecast. And so, a “risk-off” approach was evident in the trading patterns.

The biotechnology sector continued to slide. The exchange-traded fund iShares Nasdaq Biotechnology Index (ETF) (NASDAQ:IBB) fell again, as its losses for October were extended to over 8%. And the Dow Jones Transportation Average fell 0.4%, with J B Hunt Transport Services Inc (NASDAQ:JBHT) down 2% after missing analysts’ estimates.

At the close the Dow Jones Industrial Average fell 52 points to close at 18,086, the S&P 500 fell 6 points to 2,127, the Nasdaq lost 14 at 5,200, and the Russell 2000 closed at 1,210, off 2 points. The NYSE’s primary exchange traded 706 million shares (below average) with total volume of 2.8 billion shares, and the Nasdaq crossed 1.4 billion shares. On the Big Board, decliners outpaced advancers by 1.5-to-1, and on the Nasdaq, decliners led by a like number. On the NYSE, blocks fell to 4,374 from 5,138 on Friday.

SPDR S&P Bank Etf (KBE) still a buy
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Bullish Bank Stocks Are Charging Higher

On Oct. 3, I inserted the SPDR KBW Bank (ETF) (NYSEARCA:KBE) with the comment that in order to continue to remain in a bullish trend, it has to “pop above the resistance line at about $33.60.” On Oct. 10, the ETF jumped to $34.59, preserving the bull channel and confirming that despite being despised in public by the politicians, they must be supported by them or the U.S. economy goes into the tank.

Note the new chart that shows the MACD (long-term indicator) arching up, which usually occurs before a new move higher. Also note the high volume of sellers, again an indication of the public’s sales or short sales, since almost immediately four major banks announced better-than-expected earnings, the latest being Bank Of America Corp (NYSE:BAC).

Conclusion: The banking sector will continue to prosper and should receive a spurt of heavy buying when the Federal Reserve raises short-term rates. The press is against them, and the politicians are (publicly) against them. Now is the time to buy that most unloved of all sectors — the banking sector.

Today’s Trading Landscape

To see a list of the companies reporting earnings today, click here.

For a list of this week’s economic reports due out, click here.


Article printed from InvestorPlace Media, https://investorplace.com/2016/10/bullish-bank-stocks/.

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