Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
Micro Strategy Bubble Mania - 10th May 24
Biden's Bureau of Labor Statistics is Cooking Jobs Reports - 10th May 24
Bitcoin Price Swings Analysis - 9th May 24
Could Chinese Gold Be the Straw That Breaks the Dollar's Back? - 9th May 24
The Federal Reserve Is Broke! - 9th May 24
The Elliott Wave Crash Course - 9th May 24
Psychologically Prepared for Bitcoin Bull Market Bubble MANIA Rug Pull Corrections 2024 - 8th May 24
Why You Should Pay Attention to This Time-Tested Stock Market Indicator Now - 8th May 24
Copper: The India Factor - 8th May 24
Gold 2008 and 2022 All Over Again? Stocks, USDX - 8th May 24
Holocaust Survivor States Israel is Like Nazi Germany, The Fourth Reich - 8th May 24
Fourth Reich Invades Rafah Concentration Camp To Kill Palestinian Children - 8th May 24
THE GLOBAL WARMING CLIMATE CHANGE MEGA-TREND IS THE INFLATION MEGA-TREND! - 3rd May 24
Banxe Reviews: Revolutionising Financial Transactions with Innovative Solutions - 3rd May 24
MRNA - The beginning of the end of cancer? - 3rd May 24
The Future of Gaming: What's Coming Next? - 3rd May 24
What is A Split Capital Investment Trust? - 3rd May 24
AI Tech Stocks Earnings Season Stock Market Correction Opportunities - 29th Apr 24
The Federal Reserve's $34.5 Trillion Problem - 29th Apr 24
Inflation Still Runs Hot, Gold and Silver Prices Stabilize - 29th Apr 24
GOLD, OIL and WHEAT STOCKS - 29th Apr 24
Is Bitcoin Still an Asymmetric Opportunity? - 29th Apr 24
AI Tech Stocks Earnings Season Opportunities - 28th Apr 24
S&P Stock Market Detailed Trend Forecast Into End 2024 - 25th Apr 24
US Presidential Election Year Equity Performance in the Presence of an Inverted Yield Curve- 25th Apr 24
Stock Market "Bullish Buzz" Reaches Highest Level in 53 Years - 25th Apr 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

The New World Of Investing SPDR KBW Regional Banking KRE ETF

Companies / Exchange Traded Funds Nov 19, 2009 - 02:54 AM GMT

By: Guy_Lerner

Companies

Best Financial Markets Analysis ArticleIn this new era where fundamentals seem to matter less and less, here is an ETF that seems to fit right in with that theme. It is the SPDR KBW Regional Banking (symbol: KRE) ETF.

It isn't lost on me that the local or Main Street economy is in the toilet. All I need to do is drive down the nearby 4 lane road with all the malls and strip centers to know that "things" aren't that good, and they are unlikely to improve any time soon. After all, how many tortilla restaurants and nail shops can one locale support? Who is going to fill all those empty stores?


Like all of you, I read about the increasing number of bank failures, the impending commercial real estate crisis, the high unemployment rate, and the increasing number of home foreclosures just to mention a few of our economic pleasantries. It would seem that none of this is good for the regional banks, who have been treated as pariahs as the Wall Street Money Center banks garner all the monetary stimulus from Washington. But when looking at the charts, the SPDR KBW Regional Banking ETF or KRE is the kind of equity that stands out.

Welcome to the new world of investing. The fundamentals are stinky, but the chart looks great. Maybe all those fundamentals are baked in to the cake?

Before looking at the charts, here is a CNBC video of banking analyst Meredith Whitney; the video is interesting in and of itself, but what caught my attention occurred just before the 5 minute mark when she spoke about last year's trade and this year's trade in the banking sector. (Thanks to Trader Mark at FundMyMutualFund for bringing the video to my attention.)

Last year's trade was to go long the Money Center Banks and short the Regional Banks, and in essence, that is how things shaped up as the big banks gained over 100% from the March lows and the Regional Banks only notched a 50% gain. Whitney now believes that the two sectors will converge although she does stop short in that she does not give an endorsement for the regional banks.

Another factor to consider is insider buying. According to InsiderScore, there has been "buying at battered Regional Banks and in other less glamorous pockets of the Financial sector," and this buying has been to an extreme. One caveat, however, is that financial company insiders timed their buys poorly in the recent bear market.

With this in mind, let's look at two charts!

Figure 1 is a weekly chart of KRE. Price is basing along the 40 week moving average, which is now turning up. A weekly close above the pivot low (at 21.08 and marked with blue up arrows) would be a positive, and this would also represent a close over 3 pivot low points, which I would also view positively. A weekly close over the trend line formed by two prior pivot highs (at 22.43) would likely catapult prices to the $30 level.

Figure 1. KRE/ weekly

As far as a stop loss goes, I would look at a monthly chart. See figure 2. I would use one of two things: 1) either a monthly close below the pivot high point at 20.86; or 2) a monthly close below the simple 10 month moving average.

Figure 2. KRE/ monthly

In sum, I like the Regional Banks and the KRE. It has been a relative under performer, and maybe some of that "hot" may rotate to this sector. Insider buying is a plus as well.

    By Guy Lerner

      http://thetechnicaltakedotcom.blogspot.com/

      Guy M. Lerner, MD is the founder of ARL Advisers, LLC and managing partner of ARL Investment Partners, L.P. Dr. Lerner utilizes a research driven approach to determine those factors which lead to sustainable moves in the markets. He has developed many proprietary tools and trading models in his quest to outperform. Over the past four years, Lerner has shared his innovative approach with the readers of RealMoney.com and TheStreet.com as a featured columnist. He has been a regular guest on the Money Man Radio Show, DEX-TV, routinely published in the some of the most widely-read financial publications and has been a marquee speaker at financial seminars around the world.

      © 2009 Copyright Guy Lerner - All Rights Reserved
      Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

      Guy Lerner Archive

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in