It doesn’t sound like a difficult task, but in the almost six months since the post-Lehman chill has descended upon the banking industry, bank stocks have been unable to put together a rally lasting more than a week.
The chart below shows eight meaningful rally attempts since last September and only one of them, the tepid post-Inauguration bounce, was able to make it to the sixth day before turning lower. Today is the fifth day since the KBW Bank Index (BKX) began to rally. The chart below shows data through yesterday’s close – and does not reflect the 4% drop in the index in the first three hours of today’s session. While February’s high of 27.99 is important to watch as a potential resistance point, it is probably more important that banks continue to rally past a fifth and sixth day, which would make next Tuesday a critical momentum check for the banks.
At some point, the markets will gravitate away from the banks toward the economy as the critical driver of valuations. Until then, it will continue to be all about the banks.