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With the current crash of the Regional Banking ETF (KRE) some might marvel if there have been enough technical warnings forward of the crash. Sure, there have been. To make clear, we’re on the lookout for causes to not be lengthy this ETF.
(1) To start, final April the KRE 50EMA crossed down via the 200EMA (a Loss of life Cross), giving an LT Pattern Mannequin SELL Sign. We view mechanical indicators as info flags, not motion instructions, so this knowledgeable us that the long-term technical image had turned destructive. This by no means modified.
(2) The 20EMA crossed down via the 50EMA (Darkish Cross) on March 7, two days earlier than the crash. This was an IT Pattern Mannequin SELL Sign, the third because the Loss of life Cross, so we might wish to study different indications to provide it context.
(3) There was a PMO (Value Momentum Oscillator) crossover SELL Sign, which is when the PMO crosses down via its sign line (10EMA). Additionally, the PMO was falling about three weeks forward of the crash, a situation throughout which we don’t wish to be lengthy.
(4) Lastly, for this chart, On-Steadiness Quantity (OBV) was falling since August, displaying quantity transferring out, whereas worth moved sideways.
Subsequent, our participation evaluation beneath dumps extra bearish proof onto the pile.
(1) Our Silver Cross Index (SCI) reveals the proportion of KRE part shares with the 20EMA above the 50EMA (Silver Cross). We will see it declining and crossing down via its sign line weeks earlier than the crash, and the studying was solely 40% simply earlier than the crash.
(2) The Golden Cross Index (GCI) reveals that solely 51% of shares had their 50EMA above their 200EMA (Golden Cross).
(3) The % Shares Above 20/50/200EMA confirmed participation crashing nicely forward of the ultimate worth crash, and their readings had been within the basement the day earlier than the underside fell out.
Conclusion: Ready till a number of days earlier than the crash, there was an abundance of technical proof telling us that KRE was not candidate for an extended place. To say the least! Whereas we might not have forseen the ultimate calamity, there was no justification for being lengthy. On the time of this writing, on the highest chart we are able to see a bearish reverse pennant formation, from which worth has damaged down, forecasting a unbroken worth decline.
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Technical Evaluation is a windsock, not a crystal ball. –Carl Swenlin
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Value Momentum Oscillator (PMO)
Swenlin Buying and selling Oscillators (STO-B and STO-V)
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Carl Swenlin is a veteran technical analyst who has been actively engaged in market evaluation since 1981. A pioneer within the creation of on-line technical assets, he was president and founding father of DecisionPoint.com, one of many premier market timing and technical evaluation web sites on the internet. DecisionPoint makes a speciality of inventory market indicators and charting. Since DecisionPoint merged with StockCharts.com in 2013, Carl has served a consulting technical analyst and weblog contributor.
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