Bruce Pile

Earnings Season: U.S. Banks Will Make or Break the Rally

The rally is at an interesting historical juncture with the banks. A lot of purely price chart technicals seem to show a significant turn point to the upside. For example, look at the article here at SA on April 10 by Dr. Duru "Rare Market Indicator Sighting: T2108 Over 90%". The T2108 (it's name in Telechart) is the percentage of stocks trading above their 40 dma. This is indeed very rare. As Dr. Duru points out, since the 80s, the only 7 times it goes to 90% or higher ('91 and '03) it was at turn points into big climbs. Over at safehaven.com/article-..., there is an article with a charting of the T2108 under an S&P 500 chart going back to '97. The author uses it to point out that the elevated reading means an overbought market top. But that's the short term read as the T2108 typically goes to around 80 at most tops in either decline or climb mode. But at those rare junctures where a transition takes place from decline to climb, the T2108 goes a little above that level to the rare 90 level. It did just before the big climb in '97 and again in early '03 switching from the last bear market. The only other time on this weekly T2108 chart is now!

Whether you believe an improvement in fundamentals is causing it or you think, as I do, that a rally is being "forced' by the government and its unprecedented intervention into the banks and may not at all be the end of the bear market resulting in a premature move to 90 by the T2108, you have to consider the mounting evidence for at least a short-term move up. What the banks' reports say now will probably provide some weight to pull the market higher.