Technical Analyst, Saxo Bank
Summary: The European and US banking sectors have been sold off massively the past week. Individual stocks still heavy but the sector has found support. Will we see a bounce or a break ?
The Euro Stoxx 600 banking sector here illustrated by the Lyxor Stoxx Europe 600 Banks ETF (LNBK) has taken a beating the past week. Breaking rising trendline and supports the Sector ETF has lost 50% of the gain since October 2022. But there could be more trouble ahead.
RSI is negative with no divergence and the share price is below the daily cloud having found some support at the 0.50 retracement.
Short-term downside potential to the 0.618 retracement at 19.62, the 200 daily Moving average and the strong support around 19.45.
Weekly chart: LNBK broke bearish out of rising channel. Strong support area around 20.26 and 19.45 and the upper cloud at around 19.28
The US Banking Sector (illustrated by the SPDR S&P Bank ETF - KBE) has taken out support at around 42.81 to bounce with few cents of next support at around 34.68.
However, with some US bank indicated lower pre-market the sector is likely to trade lower and could be breaking the 34.68. A move down to strong support at around 28.20 seems likely.
Trend is down and it would take a close above 50 to reverse that. A close above 42.61 could put the down trend on pause for a while but to gain some upside traction a close back above the 200 weekly Moving Average around 45.15 is needed.
(Weekly chart)
The US Regional Banking ETF (KRE) has paused at the support at 42.23 but could the taken. A close below could fuel another sell-off down to strong support at around 33.54.
Short-term a 0.382 retrace to around 50.86 should not be ruled but for KRE .
(Weekly chart)
2024: The wasted year
Markets are driven by election optimism, overshadowing growing debt and liquidity concerns. The 2024 elections loom large, but economic fundamentals and debt issues warrant cautious investment.
As US economic slowdown hints at a shift away from exceptionalism, USD faces downside with looming Fed cuts. AUD and NZD set to outperform as their rate cuts lag. JPY gains on carry unwind bets and BOJ pivot.
Amid AI and obesity drug excitement, equities see varied prospects: neutral on overvalued US stocks, negative on Japan due to JPY risks, positive on Europe. European defence stocks gain appeal.
With the economic slowdown, quality assets will gain favour, especially sovereign bonds up to 5 years. Central banks' potential rate cuts in Q2 suggest extending duration, despite policy and inflation concerns.
Commodities poised for rebound. The "Year of the Metal" boosts gold and silver, copper awaits rate cuts. Grains may recover, natural gas stabilises. Gold targets $2,300-$2,500/oz, copper's breakout could signal growth.
Markets are driven by election optimism, overshadowing growing debt and liquidity concerns. The 2024 elections loom large, but economic fundamentals and debt issues warrant cautious investment.
As US economic slowdown hints at a shift away from exceptionalism, USD faces downside with looming Fed cuts. AUD and NZD set to outperform as their rate cuts lag. JPY gains on carry unwind bets and BOJ pivot.
Amid AI and obesity drug excitement, equities see varied prospects: neutral on overvalued US stocks, negative on Japan due to JPY risks, positive on Europe. European defence stocks gain appeal.
With the economic slowdown, quality assets will gain favour, especially sovereign bonds up to 5 years. Central banks' potential rate cuts in Q2 suggest extending duration, despite policy and inflation concerns.
Commodities poised for rebound. The "Year of the Metal" boosts gold and silver, copper awaits rate cuts. Grains may recover, natural gas stabilises. Gold targets $2,300-$2,500/oz, copper's breakout could signal growth.