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Stocks , US Markets

What Bank Stocks Are Telling You About Stock Market (Again)

KBW Banking Index gave an early warning in 2007 -- here's what it's showing now

by Bob Stokes
Updated: March 26, 2019

The stock market as a whole broke one record high after another in recent years, yet the index of one prominent sector has failed to do so.

I'm talking about the KBW Banking Index, which hit its all-time high way back in February 2007.

Yes, bank stocks underperformed the broad stock market for 12 years. Think about that.

At the time, our subscribers were not surprised. Our December 2006 Elliott Wave Financial Forecast noted:

The KBW Banking Index is now sputtering badly.... [which] points to something much more serious than a brief market correction.

In fact, the index began its bear market eight months before the DJIA, which topped in October 2007.

So, is banking sector weakness always a warning sign for the market as a whole?

Well, financial history generally does not repeat exactly. If it did, market forecasting would be a lot easier.

Yet, you should certainly be in "alert mode" if today's conditions are only just similar to past occurrences.

With that in mind, consider this chart and commentary from our March 22 U.S. Short Term Update, which alerts subscribers to near-term market developments three times a week:


...the bank index made a countertrend rally high on Tuesday, March 19, and in just four days has declined a whopping 10.7%.

So, the KBW Banking Index has been hit considerably harder than the DJIA, even considering the main index's 460-point drop on March 22.

The action in the prices of bank stocks is only one factor to keep in mind regarding the health of the overall market.

Technical indicators we're tracking are also sending an important message about the timing of the main indexes' next major price moves.

Learn how you can prepare by reading below, risk-free.

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The wealth of details includes seven charts across multiple time frames -- perhaps most importantly, the new Theorist provides highly timely information on a trend channel of the S&P 500 index.

Again: The trend channel information is time-sensitive!

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