Banks are Fast Approaching a Critical Decision Point

"A bank is a place where they lend you an umbrella in fair weather and ask for it back when it begins to rain." - Robert Frost

Today's Chart of the Day is the KBW Bank Index. You want to talk about show me time? This chart below shows us that a major directional decision is about to be made in a very important space for the US Equities market.

We know what happened to banks during 2008. What sometimes gets forgotten is just how powerful that move was off the early 2009 lows. We as technicians have these charts pretty much engraved in our brains. But in casual conversations with investors, I've noticed that the monster move in banks during 2009 often gets lost in the shuffle. This move was so powerful, in fact, that it has taken two and half years to consolidate those gains.

In the chart above we can see that prices for the KBW Bank Index have been trading within a range in between two converging trendlines. The question we need to ask ourselves is whether the breakout will occur to the upside, or if prices rollover and breakdown as it approaches the apex of this pattern. I have a feeling that the decisive move will be the beginning of a much larger directional trend.

Source:

KBW Bank Index 12-5-12 (ChartOfTheDay.com)

Tags: $XLF $BKX