The Tide Is Retreating for the Banks

KBW Bank Index -- Daily eSignal

The KBW Bank Index (BKX) shows a similar pattern, with notable downturn at the 200-day moving average earlier this month. In addition, there's an added feature that's missing on the Bank of America chart: volume is noticeably bearish with a number of key distribution days since the May 8 high.

This setup points to steady selling by institutions at the same time they've been talking up these issues to the public. Admittedly, the wave of secondary offerings dilutes this volume pattern, adding millions of shares right near the rally highs. This, in turn, raises the most troubling question about the post-March bank recovery:

In a nutshell, have Wall Street and the government manipulated bank stocks higher in the last two months to garner a bigger bundle of capital from their ubiquitous secondary offerings? I suppose there's room for debate, but there's little doubt in my mind that this is exactly what's happened to the banking sector in the last two months.