European Banks On The Move Higher:
The very diverse financial space has lots of moving parts. Of course the traditional money center banks are probably the most widely followed, but the 10 year yield is most likely a close second with their implications on credit card and mortgage rates (TNX recorded a bullish engulfing candle at its rising 50 day SMA Friday). There are the exchanges and broker dealers, and then one sub sector left for dead in recent memory were the European banks. The chart of the EUFN, shows the ETF just 7% off most recent 52 week highs, and the fund is higher by 9% YTD and sports a very slippery dividend yield of 9.7%. The WEEKLY chart of CS, a top 10 component, looks constructive, as it forms a rounded bottom pattern, with bears seemingly having no success pushing it lower this year (in 2018 it traded roughly between the round 10-20 figures). DB seems to be the outlier in the group slumping more than 7% this week, and sitting 31% off most recent 52 week highs. The EUFN looks productive on its longer term WEEKLY chart as the last 3 weeks CLOSED very taut within just .18 of each other. This type of action often leads to explosive moves once resolved.
Regionals Making Their Presence Felt:
The regional banks have turned higher, perhaps catching the rising tide that has overcome the financials group. What the reason or whether it is deserved or not is irrelevant, as PRICE action is speaking loudly. The chart of the KRE below shows a break above a symmetrical triangle last week, and this week witnessing mild follow through advancing more than 1%. It is a good start, and a break above the bearish engulfing week ending 8/2 that dropped 5.4% would decisively break a series of lower highs that began in mid 2018. The largest component in the ETF, FRC just broke above a 107.85 cup base pivot in a pattern 6 months in duration. Perhaps some mean reversion will develop as the KRE trades 5% off its most recent 52 week highs, while the XLF is right at its highest peak in one year.
Continuing the regional bank theme, below we show the chart of ZION, and how it appeared in our 10/24 Financial Note. The name recorded a move above a bullish inverse head and shoulders formation, the day BEFORE a strong breakaway gap following the most recent earnings. It took courage to enter if one did, but remember if one is a longer term investor looking to capture potential large returns, one has to put up with that four times a year. ZION registered its first four week winning streak since February-March, and is approaching the very round 50 number which has been problematic dating back to last November. A move through that level could be powerful and put it on a course to the 60 number last seen in early 2018.