Without a "surprise" cut in interest rates yesterday, that could spell big trouble for banking stocks short-term. We've been talking about some of the technicals for this group lately and it has had us "bearish" in the group. On Tuesday I set up a bearish play for the S&P Banks Index (BIX.X) and gave traders some levels to be looking for. Traders that too bearish action in this group when the BIX.X traded below 643 should be looking good here. The bullish percent data for this group stands at 72% bullish and indicates that this group is short-term "overbought". Back in March of 2000, the bullish percent reading for this group reached a low of 10% before reversing to current levels.
S&P Banks Index (BIX.X) Chart - 60-minute interval.
The S&P Banks Index (BIX.X) looks suspect and the lack of a rate cut yesterday is having a negative effect on this group. However, traders should not be complacent thinking that things are just going to fall apart. Yes, there's enough bad news in the markets to "choke a horse," and we'd want to see a break back below the 627 level before we get "too comfortable." A bear's target remains 597. Stock/option traders should note sector components for the BIX.X are (ASO, BAC, BBT, BK, CMA, FBF, FITB, FSR, FTU, HBAN, JPM, KEY, MEL, NCC, NTRS, ONE, PNC, RGBK, SNV, SOTR, STI, STT, SUB, UPC, USB, WB, WFC).
Oil Index should be watched
Traders and investors might want to keep a close eye on the CBOE Oil Index (OIX.X). With inflation recently creeping into the picture, this might be a group that continues to benefit from a worried market and strong fundamentals. The technicals don't look that bad either!
Oil Index (OIX.X) Chart - 60-minute interval.
A double bottom could be forming just above the 305 level and this is where I'd be placing my stop for any bullish plays in this group. Stock and option traders looking to play some oil stocks could you this level to help correlate their trading. A move above 313 would not only take this index above our short- term downtrend, but break above our "confirmation" level for that trend.