Regional Banks and the 23-Month Moving Average

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Yesterday I wrote about Alibaba and the 23-month moving average ahead of its earnings report.

Now that it did report, to repeat,

“The monthly chart is one of my favorites to look at, especially when one draws in the 23- and 80-month moving averages.

BABA ran right to the 23-month MA ahead of the earnings report.

What could that mean?

1. If the price clears, then we will assume that the stock has more room to run with a now 2-year business cycle expansion.
2. If the stock does indeed gap higher, then we are looking for a move to around $100.
3. If the stock comes in lower, we will use a support level of $77-80 to gauge the company’s health.”

Clearly choice 3 is what we are watching to see if that area holds or not.

Now, we have a similar situation with one of our Economic Modern Family members, our Prodigal Son, Regional Banks KRE.

To review, KRE was the first sector in the Family to signal a warning in March 2023 that something was amiss.

As other sectors were running to new highs, KRE did not clear the 23-month moving average, but also broke below the 80-monthly MA, setting the stage for a big correction on news of bank failures.

Since then, KRE has not been able to return back over either of these key monthly moving averages.

Til now???

The 23-month MA sits at $51.30.

However, we must note that on a shorter timeframe, KRE is trading at its highest levels since January 2024.

Therefore, we do have momentum.

Hence, while KRE has been in contraction really since 2022, it now stands a chance of going into expansion.

We are not there yet, but keep your eyes on

1. KRE holding $49-50
2. KRE closing the month over the 23-month MA and holding there

Mish appeared with this afternoon with Dave Keller of Stockcharts on Final Bar-have a listen.

 

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ETF Summary

S&P 500 (SPY) Near all time highs over 524

Russell 2000 (IWM) 202 support now with 210.80 ATHs

Dow (DIA) 387 support and 400 resistance

Nasdaq (QQQ) 437 key support 449.34 ATHs

Regional banks (KRE) Compelling but not there yet

Semiconductors (SMH) 230.05 ATHs

Transportation (IYT) 64 support 67 resistance -still relatively weak

Biotechnology (IBB) 135 cleared next resistance 137

Retail (XRT) 80.10 high today is the new 2024 high with 75 key support

iShares iBoxx Hi Yd Cor Bond ETF (HYG) Back over the 50-DMA now much hold