Next week we get a Fed meeting and a quadruple witching options expiration day. These are both important events that I like to be aware of on the charts. Leading into these events we have some significant US banks plummeting. Watch closely to see if these chart waterfalls can reverse during the next two weeks.
The first chart is Citigroup. Citi is making new lows in relative strength shown in purple. When banks are underperforming the broader market, that is usually a problem. You can see this happened in 2015 as well. In the last two weeks, Citi has lost 16% ! Yikes! Perhaps some news out of the Fed can help this chart build a bottom but it is very messy to own here. The stock is making new 52-week lows.
The next bank that is waterfalling lower is Bank of America. (BAC). The stock is down 25% from the highs in the spring. There is also no sign of improvement on momentum as the PPO is building larger histograms. New 52-week lows are not traits for banks stocks in a big bull market. The SCTR (a StockCharts assessment of strength compared to large cap peers) shows the stock is very close to fresh two year lows.
Wells Fargo is in an even steeper decline with two massive bars for the last two weeks. This stock is not only at 52-week lows, but two-year lows! Until these charts bottom, I think it will be difficult for the indexes to build bases.
With the Fed meeting next week, this could be one of the biggest meetings to influence the direction of these bank stocks. With this sort of weakness, the FOMC will be wary of further damaging the banking sector.
Lastly, these problem charts are not exclusive to the USA. On the image below, notice all of these financial charts are drilling into the lower right corner. Until this sector starts to base, the answer is lower for longer.
Next week we get a Fed meeting and a quadruple witching options expiration day. These are both important events that I like to be aware of on the charts. Leading into these events we have some significant banks worldwide plummeting.
Perhaps the Fed meeting will give us some room for optimism. Until then, try to protect your portfolio. Watch closely to see if these chart waterfalls reverse during the next two weeks.