Should the Market Worry About Regional Banks Sector?

S&P Regional Banking ETF (NYSE:KRE) is a member of my Economic Modern Family.

With bank earnings in gear, this ETF measures the smaller banks-the ones where people living in more rural communities and smaller cities often go to borrow and save money.

KRE-Weekly Chart

Here is a passage from Mar. 22, 2022:

“We have and continue to use Mish's Economic Modern Family to successfully navigate through the pandemic and now, in 2022, we use its insights to guide us through a year that has three main overhead pressures: geopolitical stress from the current Russian/Ukraine war, inflation and, finally, rising interest rates.”

I quote that passage as one week later marked the high point of the S&P 500. And we all know what happened from there.

So, here we are in 2023, and the enthusiasm for a bottom remains high. Calls for a Fed pivot are relentless.

Yet, like Mar. 22, 2022, the Russia/Ukraine war persists, inflation, is cooling somewhat, but in some areas, forges on. And interest rates are still rising; the Fed has said nothing about a pivot.

By the way, it's Deja Vu, as the U.S. has a debt ceiling emergency in the midst.

I remember 2011. The political battle to delay the inevitable-raise the ceiling and print more money. Until everyone played nice, the market fell 20%.

That makes me wonder, is this why KRE has lagged and lives so dangerously close to a weekly chart breakdown?

First, the 6-month calendar range. The January high in KRE is 61.08, just under the 50-day moving average.

The 6-month low is 57.50, precisely on the 200-week moving average.

We love the calendar range this year because it lines up well with major moving averages. So, now KRE sits about the midpoint of the range.

A move under 57.50, and regardless of what the other members are doing, we will take that as a fair warning.

A move above 61.10, and we take that as a good sign and continue shopping.

However, this mid-range chop can wreak havoc, so tread lightly with patience until the range reconciles.

And, remember-always best to look at the weakest link in the family and the strongest member. KRE is the weakest.

So we ask, is this a temporary malaise or contagious with further illness on the horizon?

ETF Summary

• S&P 500 (NYSE:SPY): Jan calendar range reset on day 1, and SPY fails the 200 and 50-DMA.
• iShares Russell 2000 ETF (NYSE:IWM): It is In better shape than SPY but still a nasty reversal and must hold 180.
• Dow Jones Industrial Average ETF Trust (NYSE:DIA): The ETF is back under the 50-DMA as industrials lose ground.
• Invesco QQQ Trust (NASDAQ:QQQ): The ETF is sitting just under the 50 DMA and never cleared the 200-WMA.
• Regional banks (KRE): The ETF led the way down and now must hold 57.50.
• VanEck Semiconductor ETF (NASDAQ:SMH): The ETF is still holding key support at the 50-WMA, so we shall see.
• iShares Transportation Average ETF (NYSE:IYT): 225 key support here.
• iShares Biotechnology ETF (NASDAQ:IBB): The ETF is still the best sector with 132 critical support.
• S&P Retail ETF (NYSE:XRT): 63 is the 200-WMA if the market is good, must hold.