KRE Regional Bank ETF Weekly Chart; Two-Leg Bull Flag

The banks are trending higher as the yield curve steepens. Lending is the life-blood of regional banks and the parabolic price move in recent weeks verifies this sentiment. KRE gaps higher for three consecutive weeks. The 3-month to 10-year spread as well as the 2-10 spread, and other spreads, are no longer inverted indicating a steepening yield curve.

The US bond market is closed today in honor of Veterans Day. Thanks to all the vets. Yields are; 2-year 1.67%, 5-year 1.75%, 10-year 1.94%, 30-year 2.42%. The 2-10 spread is 26.1 basis points a far cry from zero and negative. The 10-year should move above 2% which will ring alarm bells and give television broadcasters something to crow about.

What is good for the banks, however, may not be good for the rest of the economy. If rates are on the rise, many American individuals and businesses that have spent money like drunken sailors in recent years, since money is free, may begin experiencing pain with higher and higher rates (monthly payments). This would curtail overall economic spending. Television pundits say the retail consumer is carrying the economy right now. Just think, humorously, Wall Street and the entire US economy is supported on the thin frail shoulders of Aunt Jane who wears a babushka, walks around in worn-out orthopedic shoes and shops at JCP.

The chart shows a textbook two-leg bull flag pattern. You see the first leg from 44 to 56, a 12 point advance. From March to September, a sideways to sideways lower consolidation flag is printed which is textbook behavior. If the 47.7 to 48.3 low in early September, call it 48, is the low, than 60 is the upside target to complete the 2-leg bull flag pattern.

There is price resistance at 58-ish. Keystone's 80/20 Rule says 8's lead to 2's so a print above 58 would open the door to 62-ish, which happens to be strong price resistance from 2018. The chart indicators are long and strong. Stochastics are overbot so a stutter-step would be in order right now on the weekly basis. This pullback, however, could be bot since KRE should tag 58, perhaps 60, perhaps 62.

Interestingly, considering the shaky nature of the stock market currently (since the uber low put/call ratios signal a top), that would be in conjunction with the overbot stoch's above, and banks would drop with the broad market. But it may be worthwhile to buy that coming dip in KRE. Also, due to the worrisome nature of the stock market going forward, KRE may only have that 58-ish print on the agenda (rather than 60 and 62) and then roll over again for the long-term from there.

The Aroon green line crosses above the red line, a positive bullish cross, verifying the upside banker joy. The ADX, however, shows that this current parabolic price move and rally higher is NOT a strong trend higher. This hints that KRE may only have the 58-ish in it say a month-out and that would be its swan song.

For the month, KRE is up +5.4%. XLF is up +4% and prints a new all-time record high. Here are the moves thus far this month for the banking plays. VFH +3.9%. KBE +5.3%. IYF +1.9%. UYG +3.6%. FAS +5.3%. FAZ -5%. (Do not ever trade 3x ETF offerings since they are price-corrupt instruments.) SKF -3.5%. GS +4.5%. JPM +4.4%. BAC +6.4%. C +6.7%. WFC +5.8%. MS +6.7%. RF +4.8%. PNC +3.8%. ZION +5.4%. STT +10.6%. STI +4.8%. KEY +7.7%.

Keystone does not own the banks either way currently but may buy KRE long, say, in a couple of weeks, after a downdraft with the broad market occurs, and only for a short 2 or 3 week trade which may take it back up to the 58-ish as discussed above; then perhaps flip the trade short from there forward. 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.