Many cross-currents remain in this market. One can argue there are no "new" reports of good or bad news, only new "perceptions" of mostly bad news. The economy continues to strengthen but today's housing starts number disappointed many. The Fed's decision to hold rates where they are rattled some investors. The fear is that this recovery is not proceeding as expected. When does the economic cycle ever proceed totally as planned? Never. Although the cycle remains, there continues to be an element of uncertainty, either to the upside or downside. This is how the cycle operates.
The above chart illustrates the Bank Stock Index (BKX.X) shows signs of consolidation. The banking industry has been pummeled during this last recession. It continues to encounter tremendous resistance due to the fiscal problems in Europe. For the most part the U.S. bank exposure to these problems is minimal. More importantly, for this market to put together any kind of meaningful rally the bank stocks must participate. Although the doomsayers continue to their negative predictions, the Bank Index continues to show signs of life. This is exactly where a bullish perspective would place it. Now is the time to pick up those bank stocks which you did not want to chase during the last rally. Keep an eye on the present support line. If it is violated things could get quite a bit more interesting.
Of course, Washington could announce some boneheaded-type legislation aimed at "protecting us from the banks." This would send the market spiraling downward. For now, they are preoccupied with their own public relations problem handling the Gulf Shore oil leak and internal personnel changes.
Note: The above is for information purposes only. Any decision to buy, sell, or hold a specif investment should be reviewed by your own investment advisor.
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