Several large money-center banks have rallied up to longer-term resistance, and the weakness in their volume analysis makes them vulnerable to a further decline, writes MoneyShow’s Tom Aspray.

Wednesday’s market rally fizzled into the close, and the market internals closed clearly negative. This was disappointing, and while stock futures are again higher in early trading, another push to the downside cannot be ruled out.

The McClellan oscillator, a short term Advance/Decline indicator, is at -145, which is only moderately oversold. The number of NYSE stocks above their 50-day MAs is now down to 40.7%, after peaking above 80% in early September. In early June this reading was just above 10%.

The NYSE Composite has dropped below the last two lows, but the NYSE Advance/Decline line is still holding above its lows.

The best-performing sector so far in 2012 has been the Select Sector SPDR Financial (XLF). And while the intermediate-term outlook suggests it is likely to outperform the Spyder Trust (SPY), there are some short-term warning signs.

Several of the big US and Canadian money-center banks are showing signs of short-term weakness, so those long any of these banks should have a plan in place to be prepared for a correction.

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Chart Analysis: Bank of America (BAC) shows daily trend line resistance (line a) in the $9.60 to $9.80 area. BAC topped in March in the $9.85 to $10.10 area.

  • The daily uptrend (line b) is now being tested, and a close below $9.05 will complete a short-term top.

  • The 38.2% Fibonacci retracement support is at $8.68, which is about 6.8% below current levels. The more important 50% support stands at $8.34, which is a key level for long-term investors.

  • The relative performance is still holding above its rising WMA, and made new highs this week. The RS line has further support at line d.

  • The on-balance volume (OBV) violated its uptrend on September 26, and has since stayed below its declining WMA, which is a sign of weakness.

  • The weekly OBV (not shown) is above its WMA, and is looking more positive.

JPMorgan Chase (JPM) has formed higher highs since mid-September (line g). JPM was higher Wednesday, and there is more important resistance in the $44 to $44.30 area (line f).

  • The relative performance or RS analysis is still rising, and indicates JPM is outperforming the S&P 500.

  • The RS line has bounced from its WMA, with more important support at line i.

  • The OBV has formed lower highs (line j), and this negative divergence is a sign of weakness.

  • Another failure of the OBV to move above its WMA would add further weight to the bearish divergence.

  • The weekly RS and OBV analysis (not shown) are both positive.

  • There is minor support now at $41.10 to $40.60.

  • The 38.2% Fibonacci retracement support is at $38.64, with the key 50% support at $37.13.

NEXT: What About Canadian Banks?

Tickers Mentioned: Tickers: XLF, SPY, BAC, JPM, TD