Investment banking and wealth management giants Goldman Sachs Group Inc.  (GS - Get Report) and Morgan Stanley (MS - Get Report) report earnings next week. Both stocks are deep in bear market territory but have been rebounding with the market, since setting 2018 lows on Christmas.

Near noon, Goldman stock was up 0.60% to $176.42 and Morgan Stanley was up 0.65% at $41.71.

Goldman Sachs, a member of the Dow Jones Industrial Average, was the worst performing stock in the average for 2018. Goldman closed Tuesday at $175.37, up 5% so far in 2019, but is in bear market territory 36.3% below its all-time intraday high of $275.31 set on March 12. Since trading as low as $151.70 on Dec. 26, the stock is up 15.6%. Goldman has a P/E ratio of just 7.07 and a dividend yield of 1.82%, according to Macrotrends.

Morgan Stanley closed Tuesday at $41.45, up 4.5% so far in 2019 but in bear market territory, 30.2% below its 2018 intraday high of $59.38 also set on March 12. Since trading as low as $36.74 on Dec. 24, the stock is up 12.8%. Morgan Stanley has a P/E ratio of 8.76 and a dividend yield of 2.88%.

Warning flags were flying on their daily charts through a simple technical analysis tool called a "death cross". A "death cross" occurs when the 50-day simple moving average falls below the 200-day simple moving average, which indicates that lower prices are ahead. The 50-day is in red, the 200-day is in green. When trading under a "death cross," the trading strategy is to sell strength to the 200-day SMA.

Financial stocks were in bull market runs between lows set in 2016 to highs set in March 2018. The weekly charts below show the Fibonacci Retracement levels of these bull market rallies. The weekly charts also show the 200-week simple moving average in green. I consider the 200-week as the technical "reversion to the mean."

Global Debt

One reason for the downside moves for Goldman and Morgan Stanley is the global debt story. According to data from sources that include the IMF, global debt totaled $233 trillion at the end of the third quarter.

Non-Financial Corporate Debt totals $68 trillion. Corporations around the world including U.S. corporations raised cash via bond offerings so they could increase dividends and increase share buyback programs. As debts mature, they will be squeezed by higher interest rates and wider spreads vs. U.S. Treasuries.

Government Debt totals $63 trillion. Many countries have dollar-denominated debt; significantly weaker local currencies make this a dangerous situation. U.S. debt is approaching $22 trillion but this does not include debt of Fannie Mae and Freddie Mac. At the end of the third quarter, Fannie and Freddie debt were $246.7 billion and $280.4 billion, respectively. Mortgage securitizations totaled $3,127.7 billion for Fannie Mae and $1,765 billion for Freddie Mac. Both Goldman and Morgan Stanley are Primary Dealers and thus underwriters for U.S. Government debt. They are required to put their firms' capital at risk as underwriters.

Financial Sector Debt totals $58 trillion. In the USA, the banking system will face waves of bad loans in mortgage lending, commercial real estate loans, construction & development loans, student loans, car loans and credit card debt.

Household Debt totals $44 trillion. Main Street USA and small business are being squeezed by the money center and regional banks that have tightened their lending standards beyond the .25% bump for each rate hike by the FOMC.

The Daily Chart for Goldman Sachs

Courtesy of MetaStock Xenith

Goldman has been below a "death cross" since May 29 and the 200-day SMA was nearly tested at $245.53 on Aug. 28. The four horizontal lines are my monthly, annual, quarterly and semiannual risky levels at $183.02, $186.87, $199.29 and $208.03, respectively. The bear market rally for Goldman is approaching the low end of these risky levels.

The Weekly Chart for Goldman Sachs

Courtesy of MetaStock Xenith

The weekly chart for Goldman is negative but oversold with the stock below its five-week modified moving average of $181.29 and well below its 200-week simple moving average or "reversion to the mean" at $207.79. The 12x3x3 weekly slow stochastic reading is projected to end this week at 13.95 up from 8.98 on Jan. 4. These readings are well below the oversold threshold of 20.00. Helping the rebound is the fact that at the Christmas low this reading was 6.32 well below 10.00, which is my indication that the stock was "too cheap to ignore."

Given these charts and analysis, Goldman has upside potential to my monthly and annual risky levels at $183.02 and $186.87, respectively, which is below the 61.8% Fibonacci Retracement of $190.67. If there's a positive reaction to earnings, the stock can rally further into the higher risky levels. The upside should be limited to the "reversion to the mean" at $207.79, which lines up with my semiannual risky level at $208.03 and the 50% retracement at $206.84.

The Daily Chart for Morgan Stanley

Courtesy of MetaStock Xenith

The daily chart shows that Morgan Stanley has been below a "death cross" since June 26, which tracked the stock lower as expected. There are three horizontal lines on the chart. The lower line is my monthly value level at $40.12. The second line represents two pivots.  My annual and semiannual pivots are $41.73 and $41.77, respectively. These pivots have acted as magnets the last three trading day. The highest line is my quarterly risky level at $50.03.

The Weekly Chart for Morgan Stanley

Courtesy of MetaStock Xenith

The weekly chart for Morgan Stanley will end this week positive if the stock ends above its five-week modified moving average of $41.61. The stock is above its 200-week simple moving average at $40.67 as the "reversion to the mean." Lining up with these levels is the 50% Fibonacci Retracement at $40.27. The 12x3x3 weekly slow stochastic reading is projected to end this week at 22.13, rising above the oversold threshold of 20.00.

Given these charts and analysis, investors should buy Morgan Stanley between my semiannual pivot at $41.77 and the 50% retracement at $40.27. The upside potential is to the 38.2% retracement at $44.78 and the 23.6% retracement at $50.35, which lines up with my quarterly risky level at $50.03.

Disclosure: The author has no positions in any stocks mentioned and no plans to initiate any positions within the next 72 hours.