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Why Bank Shares Are a Problem for the Stock Market

NEW YORK (TheStreet) -- Major banks are under the scrutiny of Attorney General Eric Holder, who recently warned on the Department of Justice Web site, "There is no such thing as too big to jail." This warning obviously includes the four "too big to fail" money center banks that are in the KBW Banking Index.

We crunched the numbers for all 24 components of the banking index before earnings in "Crunching the Numbers on Bank Earnings Season: JP Morgan, Wells Fargo, Citi."

Looking at today's second table below, only nine of the banks in the index beat analysts' earnings per share estimates, while three matched estimates and 12 missed. This table also shows that as of Tuesday's market close, 23 of 24 of the bank stocks have traded lower since April 9. They have been led by Bank of America (BAC) ($14.73), down 11.4%; Fifth Third Bank (FITB) ($20.28), down 10.3%; and JPMorgan Chase (JPM) ($53.34), down 10%.

Citigroup (C) ($46.36) is down 1.7% since April 9, and Wells Fargo (WFC) ($49.09) is down just a penny.

We often have said that you cannot have a bull market for stocks with the major banks in a bear market, and the weekly chart for the banking index ($67.13) is now negative, with the five-week modified moving average at $69.01. When you look at the first table, please note that 22 of the 24 regional banks are below their five-week MMAs. Also note that 20 have declining 12x3x3 weekly slow stochastics.

Here are updated profiles for the four "too big to fail" money center banks that are likely on Eric Holder's short list of being "not to big to jail."

Bank of America ($14.73, down 11% since April 9) is trading below its 200-day simple moving average at $15.50. Its May 6 low at $14.72 is a new low for 2014. The weekly chart is negative with the five-week modified moving average at $15.89. The downside risk is to its 200-week SMA at $11.47.

Citigroup ($46.36, down 1.7% since April 9) has been below its 200-day SMA at $49.99 since March 26 but is above its April 11 intraday low at $45.18. The weekly chart is neutral with the five-week MMA at $47.61 with rising 12x3x3 weekly slow stochastics. This usually means that weakness should hold its 200-week SMA at $40.49. This week's value level is $45.59 with semiannual and quarterly risky levels at $48.06 and $49.61, respectively.

JPMorgan Chase ($53.34, down 10% since April 9) broke below its 200-day SMA at $55.59 on Monday, setting a new 2014 intraday low at $53.32 on May 6. The weekly chart is negative with its five-week MMA at $56.09. Semiannual and annual value levels are $51.64 and $49.59, respectively, with quarterly and monthly risky levels at $54.47 and $61.42, respectively.

Wells Fargo ($49.09, down a penny since April 9) set an all-time intraday high at $49.97 on March 21. The weekly chart shifts to neutral given a close this week below its five-week MMA at $48.65 as the bank's 12x3x3 weekly slow stochastic is declining. Quarterly and semiannual value levels are $47.33 and $42.32, respectively, with a weekly pivot at $49.96 and monthly risky level at $50.97.

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