Morning Comment Part II...Banks Poised to Breakout?

In our “Morning Comment” this morning, we said that the employment report probably wouldn’t have much impact on the markets…unless it came-in at a much different level than expected. Well, it DID come-in at a level that was much different than expected (much better than expected)…and thus it is indeed having an outsized impact on several different markets. Not only are the stock futures rising…but so are interest rates and the dollar.

Whether the employment report has an impact on the broad market past today (when the trade issue becomes front & center once again), the rise in interest rates should have a key impact on the bank stocks going forward. The move in rates is important…because even though the KBE bank ETF has out-performed since the August lows, it has not yet broken out of the sideways range it has been in since the very beginning of the year. Yes, it looked like it was going to breakout of that range in early November, but the move above the top-end of its 10-month range was only a slight one…and it has been “riding” the top line of that range for several weeks. Therefore, if this move in the bond market today hold…and the KBE can break above its November highs of $46.80 in any meaningful way…it should confirm that the outperformance for this group is going to accelerate.

This will be bullish for the major names, but we’d also note that some of the stocks that have been lagging before the recent rally in the group could have more upside potential. Don’t get us wrong, we’re not saying that investors should avoid stocks like JPM if the KBE does indeed confirm its breakout. We’re just saying that others should also rally nicely…and might even outperform.

For example, look at Bank of NY (BK). It has already broken above an “inverse head & shoulders” pattern (in early November). If it can follow this move…with a break above $50, it will be even more bullish. The $50 level is much more than a round number. A move above that level would also give the stock its second key “higher-high” in recent months…AND take it above its trend-line going back to the summer highs of 2018!

What we’re trying to say is that if the banks see more upside follow-through…especially if it continues past today and into next week…it’s going to be bullish for many bank stocks…not just the ones that have already been working this year (like JPM).

Matthew J. Maley

Managing Director

Chief Market Strategist

Miller Tabak + Co., LLC

Founder, The Maley Report

275 Grove St. Suite 2-400

Newton, MA 02466


Although the information contained in this report (not including disclosures contained herein) has been obtained from sources we believe to be reliable, the accuracy and completeness of such information and the opinions expressed herein cannot be guaranteed. This report is for informational purposes only and under no circumstances is it to be construed as an offer to sell, or a solicitation to buy, any security. Any recommendation contained in this report may not be appropriate for all investors. Trading options is not suitable for all investors and may involve risk of loss. Additional information is available upon request or by contacting us at Miller Tabak + Co., LLC, 200 Park Ave. Suite 1700, New York, NY 10166.

Posted to The Maley Report on Dec 06, 2019 — 9:12 AM
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