Prodigal Son Regional Banks The Ball and Chain

August 4, 2020

Mish's Daily

By Mish Schneider


With the Russell 2000 breaking out over the 50 and 200-week moving averages, we should see nothing but blue skies, right?


We have lots of positives based on hope, of course.

Retail XRT, as featured a while back, is doing well.

Sister Semiconductors SMH is on the road less traveled to new all-time highs.

Transportation IYT faces a critical test at the 200-WMA.

Biotechnology IBB consolidates over the 5-year breakout.

So, what’s up with Prodigal?

Should we worry?

Regional Banks KRE are in a bearish phase.

The sector is having 2 inside weeks.

Two scenarios are likely from here.

First, yields rise a bit, dollar strengthens, and the banking sector sees money rotation into it.

Second possible scenario is that as the bankruptcies increase, the corporations get stronger while the populace gets poorer, KRE reflects the more insidious potential of the market-the one where an increasing jobless market coupled with social unrest becomes the “storm the Bastille” of the 21st century.

Or, the one where the house of cards comes tumbling down.

There is a third possibility that does not entail money rotation or a market crash.

The end of banking as we know it, where alternative currency replaces paper money and folks find new ways to borrow and save…

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S&P 500 (SPY) 325 now pivotal support 332.58 a gap to fill

Russell 2000 (IWM) 150 pivotal

Dow (DIA) 270 resistance 262.50 support

Nasdaq (QQQ) Low volume on new highs 170 pivotal

KRE (Regional Banks) 38-40 resistance to clear

SMH (Semiconductors) 165-168 pivotal support as it busts out of an ascending channel

IYT (Transportation) 179-180 resistance

IBB (Biotechnology) 142 resistance 136 support

XRT (Retail) 50.00 resistance

Volatility Index (VXX) 27.92 the 200-DMA broke today

Junk Bonds (JNK) Risk appetite on but not as hungry

LQD (iShs iBoxx High yield Bonds) 137.50 support

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