Banks Bear Watching

October 16th, 2013

by Chris Kimble

Advisor Perspectives welcomes guest contributions. The views presented here do not necessarily represent those of Advisor Perspectives.

The chart below reflects how strong the banks were from 2000 to 2007, gaining 58% while the S&P 500 was flat during that time period. In hindsight the S&P 500 was creating a large "Double Top".

So Goes the Banks, So Goes the Broad markets? Some of the time that's really true. For sure when Banks/Financials fell in 2007/2008, they contributed to the broad markets weakness!

The next chart looks back on a few key technical aspects of Banks back in 2006/07. Banks were reaching lofty overbought levels, hitting a Fibonacci 161% extension and created a bearish rising wedge pattern at (1). Once support broke, banks moved from relative strength to relative weakness.

Currently the Power of the Pattern suggests that XLF (the Banks/Financials ETF) is reaching lofty overbought momentum levels, now hitting a Fibonacci 161% extension level and has creating a potential bearish rising wedge at (2).

From a fundamental perspective, Banks seem to be in much better shape today than in 2006/2007. From a Power of the Pattern perspective, "Banks Bear Watching" due to this setup at hand and could well impact the S&P 500 IF support should be taken out (which remains in place at this time).

For information about Kimble Charting Solutions, send an email to

Website by the Boston Web Company