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.
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.
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).
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