Sunday, June 21, 2015

GS Goldman Sachs Weekly Chart

GS technical analysis is another request; Goldman Sachs is the latest favorite of long traders is the financials sector receives a boost. Regional banks are on fire. Everybody and his bro are throwing money at the banks proclaiming higher rates will lead to great things for financials ahead. GS price is shooting vertically higher to eight-year highs over the last few weeks up inside the rising wedge pattern. Negative divergence is in play over the long term (red lines) but the nearer term, this year and especially the last few weeks, the momo is clear with the green lines for the MACD line and money flow. The RSI, stochastics and money flow are all overbot indicating a topping pattern on the come.

Keystone's 2-10 spread rule needs to see a 255 basis point level to truly signal good times for banks ahead taking advantage of a steeper yield curve. The 2-10 spread, however, continues to print at the 160-170 area remaining about 80 bips or more below Keystone's key level. Thus, the hype about successful banks due to the steepening yield curve is currently misplaced optimism. Keystone will be the first to cheer lead the banks if the 2-10 spread exceeds 255 but not before then.

The stochastics and RSI over the last three weeks want to see a short pull back in price say to finish the month of June into early July but the momo and constant daily cheer leading by strategists, pundits and traders advising everyone to buy banks with both hands will bring price back up again until the MACD line and money flow indicators can form negative divergence and roll over which will create a top and roll price over to the downside. The red lines are not impressed with the move higher; the sharp move higher in price is mainly momentum due to the prospect of higher yields going forward. As seen by the previous TNX chart it is likely that the 10-year yield will stall going forward, especially in a stock market pull back, so those expecting a 3% 10-year yield in the months ahead may be disappointed which shoots a leg of the stool out from the banks.

The projection is for a pull back in GS over the coming days say to finish June into July but price will come back up again to current highs, which are record highs comparing all the way back to 2007, then with the MACD line and money flow turning neggie d, a top will be in probably in July leading into a multi-week pullback. The same analysis can be applied to the regional banks such as the KRE chart gong forward. The regional banks should print a significant top between July-September and roll over. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here. Consult your financial advisor before making any investment decision.

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