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August 25, 2005
Banks Breaking Down
The Finance sector is the largest sector in the S&P 500 (~20%) and Regional Banks are part of this sector. The Regional Bank HOLDRS (RKH) peaked in mid July with a bearish engulfing and started leading the way lower. The Nasdaq and S&P 500 peaked on 3-Aug and relative weakness in banks was not a good sign.
RKH broke below the lower trendline of a rising wedge and then consolidated (gray oval). Notice that broken support turned into resistance around 137 and this is the level to beat. A doji formed on Monday and the decline over the last two days solidifies resistance. There is support around 133, but I am not expecting it to hold.
Posted by Arthur B. Hill at August 25, 2005 09:53 AM