NEW YORK (TheStreet) -- Based upon the year-to-date performances of the 24 banks in the KBW Banking Index, analysts expect the nation's biggest banks to lead stocks higher in the second half of 2014. It seems as if Wells Fargo (WFC - Get Report) and PNC Financial (PNC) are taking this leadership role, with year-to-date gains of 17% and 16%, respectively.
The first "crunching the numbers" table shows that 21 of the 24 banks are above all five key moving averages. I show that five bank stocks have overbought 12x3x3 weekly stochastics, and the other 19 have rising readings.
Citigroup (C) is below its 200-day simple moving average at $49.33 and is down 7.4% year to date. First Niagara (FNFG) is below its 200-day SMA and its 200-week SMA at $9.68 and $10.13, respectively, and is down 16% year to date. JPMorgan (JPM - Get Report) is below its 21-day SMA on short-term slippage on the news that CEO Jamie Dimon has curable throat cancer.
All 24 bank stocks are above their five-week modified moving averages, which is the technical reason that earnings must be better than expected for these banks to continue leadership.
The second "crunching the numbers" table shows that earnings season among banks begins before the opening bell on Friday, July 11, when Wells Fargo reports quarterly results. The final regional bank earnings report comes from Cullen/Frost (CFR), which reports before the opening bell on July 30. Shortly after this report, I will publish the next Scorecard for Regional Banks.
Note that many banks have weekly pivots or weekly risky levels. This implies that volatility should be low this week for the components of the banking index. There will be new weekly levels next week, as the earnings season intensifies.
While the tables show that banks are establishing stock market leadership technically, I continue to warn, base on FDIC data, that earnings from regional banks may disappoint.
On June 4, I wrote, "Bank Stocks Have Staged a Nice Rebound, But Don't Expect It to Last." In that post, I discussed the quality of earnings. The first-quarter FDIC data showed a decline in earnings due to reduced noninterest income, such as a slower decline in reserves for losses and lower asset sales. In addition, banks are betting on higher real estate prices to slow the sale of "other real estate owned."
On June 16, I wrote, "Why the Big Banks Aren't Doing More to Boost the Economy." I talked about exposures to derivatives and assessments for the FDIC Deposit Insurance Fund.
Let's not forget that as U.S. Treasury yields rise, there will likely be mark-to-market losses on "securities held for trading." We also know that mortgage lending activities have declined, and that proprietary trading activities have been slashed.