The BKX is up 52.3% since bottoming in October 2011, and is up 25.9% so far in 2012, while the S&P 500 is up 34.1% since October and 14.6% year to date.
The BKX has been technically overbought on its weekly chart since the week of Sept. 7, and the finance sector is overvalued by 13.2% according to ValuEngine .
Bank stocks have benefited from the quantitative easing moves, and on the slow and steady improvement in the banking system that I wrote about in The Banking System's Slow, Stressful Recovery on Sept. 4.If the "QE Fatigue" I discussed last Friday in QE Fatigue Plagues Transports, May Be Contagious spreads to the money center and regional banks, the downside risk is significant. I discussed some of the issues facing the banking system on Sept. 5 in 'Too Big to Fail' Money Center Banks Still Face Stress and because of these concerns investors should not be greedy and book some profits now. Traders of bank stocks should continue to employ a "buy and trade" strategy, but be aware of the downside risks among the eleven components of the BKX I profile today. I last profiled five of these banks on Aug. 15 in Time to Book Profits in Financial Stocks: Opinion.
Chart Courtesy of Thomson/Reuters The daily chart for the BKX (49.58) shows declining momentum with the 21-day, 50-day and 200-day simple moving averages at 49.11, 47.38 and 45.46. My quarterly and annual value levels are 46.03 and 42.98 with a weekly pivot at 50.70 and monthly risky level at 52.99 versus the year to date high at 52.11 set on Sept. 14 in reaction to QE3.