Is the Banking Index sending a caution message to stocks? It has for the past 28-months and it is experiencing a major resistance test of late!
The Banking Index (BKX) started underperforming the broad market back in January of 2018, which created a negative divergence message to the broad markets.
Banks started turning much weaker than the broad market in December of 2019, almost 60-days before the broad market experienced a sharp sell-off. Banks also fell more than the broad market after its peak late last year.
The counter-trend rally over the past six weeks has banks testing a “Quad Resistance Zone” at (1). While testing this resistance zone, it created a large bearish reversal pattern two weeks ago.
Banks have been sending an important message about the overall health of the broad markets, long before virus concerns became front-page news.
What the Banking sector does at (1), most likely will send a very important message about the health of the markets for the next 60 to 90-days!