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) - Get Report 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) - Get Report 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) - Get Report, 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.
The bigger banks still face settlement fees related to the "Great Credit Crunch" and continued stress of the full implementation of Dodd-Frank limitations, which includes additional limits on trading under the Volcker Rule.
Here's are updated profiles for the four "too big to fail" money center banks. Remember that these banks are likely on Attorney General Eric Holder's short list of "not too big to jail" companies.
Bank of America(BAC) - Get Report ($16.03, up 3% YTD) went above its 200-day simple moving average at $15.65 last week after trading as low as $14.37 on May 15. The weekly chart is positive with its five-week modified moving average at $15.53 and the 200-week SMA at $11.54. Semiannual value levels lag at $10.16 and $9.11 with a weekly pivot at $16.09 and monthly and quarterly risky levels at $18.04 and $19.37, respectively.
Citigroup ($48.24, down 7.4% YTD) has been below its 200-day SMA at $49.33 since March 26 but is above its April 11 intraday low at $45.18. The weekly chart is positive with its five-week MMA at $47.68 and its 200-week SMA at $40.83. A semiannual value level is $47.07 with a weekly pivot at $48.68 and semiannual and monthly risky levels at $48.92 and $49.63, respectively.
JPMorgan ($57.05, down 2.4% YTD) has been trading back and forth around its 200-day SMA at $56.07 since April 11. The weekly chart is positive with its five-week MMA at $56.66. Annual and semiannual value levels are $50.39 and $47.41, respectively, with a semiannual pivot at $57.39 and weekly and monthly risky levels at $58.76 and $63.20, respectively.
Wells Fargo ($53.00, up 17% YTD) set an all-time intraday high at $53.08 on July 3 and has been above its 200-day SMA since Dec. 17, 2012, with this average now at $46.55. The weekly chart is positive but overbought, with its five-week MMA at $51.58. Semiannual value levels are $50.95 and $43.27 with a quarterly pivot at $53.09 and monthly and weekly risky levels at $54.55 and $54.66, respectively.
Wells Fargo is the first to report quarterly results, which is a "tell" for major banks, as the stock has a weekly chart formation that's a parabolic bubble. The stock is at an all-time high when the regional banking index at 72.38 is just above the 50% Fibonacci retracement at $69.37. The banking index was as high as $121.16 on Feb.7, 2007, and as low as $17.75 in March 2009.
Crunching the Numbers With Richard Suttmeier: Moving Averages & Stochastics
This table provides the technical status for the stocks profiled in today's report.
There are five columns with moving average titles: Five-Week Modified Moving Average, 21-Day Simple Moving Average, 50-Day Simple Moving Average, 200-Day Simple Moving Average and the 200-Week Simple Moving Average.
The column labeled 12x3x3 Weekly Slow Stochastics shows the pattern on each weekly chart with readings from Oversold, Rising, Overbought, Declining or Flat.
Interpretations: Stocks below a moving average are listed in red.
Five-Week Modified Moving Average (MMA) is one of two indicators that define whether a weekly chart profile is positive, neutral or negative. The other is the status of the 12x3x3 weekly slow stochastic.
A stock with a positive technical rating is above its five-week MMA with rising or overbought stochastics.
A stock with a negative technical rating is below its five-week MMA with declining or oversold stochastics.
A stock with a neutral technical rating has a profile that is not positive or negative.
The 200-Week Simple Moving Average (SMA) is considered a long-term technical support or resistance and as a "reversion to the mean" over a rolling three- to five-year horizon.
The 21-Day Simple Moving Average is a short-term technical support or resistance used by many hedge fund traders to adjust positions. A stock above its 21-day SMA will likely move higher over a rolling three- to five-day horizon and vice versa.
The 50-Day Simple Moving Average is also a technical support or resistance used by many strategists and commentators in financial TV.
The 200-Day Simple Moving Average is another technical support or resistance and I consider this level as a shorter-term "reversion to the mean" over a rolling six- to 12-month horizon.
Crunching the Numbers With Richard Suttmeier: Earnings & Where to Buy & Where to Sell
This presents the EPS estimates including date and before or after the close, and where to buy on weakness and where to sell on strength.
EPS Date is the day the company reports their quarterly results.
EPS Estimate is the earnings per share estimate from Wall Street analysts.
Before or After the opening bell or closing bell, respectively
Value Levels, Pivots and Risky Levels are calculated based upon the last nine weekly closes (W), nine monthly closes (M), nine quarterly closes (Q), nine semiannual closes (S) and nine annual closes (A). I have one column for pivots, which is a magnet for the period shown. The columns to the left of the pivots are first and second value levels. The columns to the right of the pivots are first and second risky levels.
Investors who wish to buy a stock should use a good-until-canceled GTC limit order to buy weakness to a value level. Investors who want to sell a stock should use a GTC limit order to sell strength to a risky level.
At the time of publication the author held no positions in any of the stocks mentioned.
This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.
Richard Suttmeier is the chief market strategist at
. He has been a professional in the U.S. Capital Markets since 1972, transferring his engineering skills to the trading and investment world.
Suttmeier has an engineering degree from Georgia Tech and a Master of Science degree from Brooklyn Poly. He began his career in the financial services industry in 1972 trading U.S. Treasury securities in the primary dealer community. He became the first long bond trader for Bache in 1978, and formed the Government Bond Department at LF Rothschild in 1981, helping establish that firm as a primary dealer in 1986. This experience gives him the insights to be an expert on monetary policy, which he features in his newsletters, and market commentary.
Suttmeier's industry licenses include, Series 7 and Registered Principal (Series 24). He has been the Chief Market Strategist for ValuEngine.com since 2008 and often appears on financial TV.
Click here for details on Suttmeier's "Buy and Trade" investment strategy.
Richard Suttmeier can be reached at RSuttmeier@Gmail.com