Regional Differences:
There has been a bifurcation in the financial arena between the regional banks and the traditional money centers. The XLF has been in the driver’s seat overall but during the last 10 weeks, the KRE has been acting better as seen on the ratio chart. On a YTD basis, the KRE is still lower by 2%, while the XLF is up 7%, and while the XLF is trading just 2% off its most recent 52-week highs, the KRE is 15% off its annual peak. Time for some mean reversion? Looking at the top 3 holdings in the well-balanced KRE, each has broken above bull flags. EWBC is inching above the very round par number, a feat in itself, and a break above a 95 trigger carries a measured move to 122. CFG could see a potential measured move to 51 after taking out a 42 bull flag pivot, and MTB on its WEEKLY chart just recorded its first bullish MACD crossover in one year and looks ready to travel to the very round 200 number in a double bottom base. It is no coincidence that regionals have firmed up with the 10-year looking for a third straight WEEKLY loss, but as it broke below the 200-day SMA Thursday, let’s be careful with the euphoria as 2 of the last 3 times it did that the yield quickly recaptured the secular line.