The bank sector is a good indicator of the health of the broader stock market.
Bulls like to see the banks in a leadership role because it indicates that the economy is doing well. But when they begin to lose momentum and underperform, it often leads to pullbacks and corrections.
As you can see in today’s chart, the Bank Index (BKX) began to stumble well before the recent correction. And that bearish divergence was a warning to market bulls – similar to the 2015-2016 setup.
On the other hand, the recent rally has given bulls an opportunity to right-side this bull market. AND the banks could play a big role… similar to the bullish breakout following the 2015-2016 setup.
Zooming in on the chart, you can see that the Banks are testing an important downtrend resistance line. Are the Banks ready to breakout?