Pay attention to the bank stocks today. They’ll likely signal the market’s next move.

Bank stocks tend to lead the broad stock market. When the banking sector is strong, it helps pull all the other sectors higher along with it. When the bank stocks are weak, the stock market is going to struggle.

For example, the bank stocks started falling in the middle of March. That action kept the S&P 500 constrained within a relatively tight trading range. But, as soon as the banking sector started to rally last week, the S&P 500 broke out to a new recovery high.

Now, though, the banking sector is facing a critical level on the chart. Take a look…

BKX broke below its 50-day moving average (MA) line in mid-March. That’s a bearish development and often shifts the intermediate-term trend from bullish to bearish. Over the past two weeks, though, BKX has rallied more than 5%. It’s still below its 50-day MA. So, the pattern still looks bearish to me. But, that’s one heck of an oversold bounce.

Now, BKX is running into its 50-day moving average line. This is a logical resistance area. The sector could pause here, chop back and forth for a bit, and build energy for another move higher to create a bullish intermediate-term trend. Or, the sector could stall out here, reverse lower, and continue the bearish trend that started a couple of weeks ago.

One way or another, though, the bank stocks are on the verge of a defining move. And since the bank sector tends to lead the broad stock market, traders should pay close attention to the action in BKX over the next few sessions for clues as to where the market is headed in the weeks ahead.

Best regards and good trading,

Jeff Clark

Reader Mailbag

Hey, Jeff. After the massive bitcoin rally in 2017, I became really interested in crypto.

Thanks to you, I was able to buy near the bottom at about $3500, and that position looks really nice already.

Have a great day!

– Loren

How have you done with your crypto trades?

And as always, you can send any other trading stories, questions, or suggestions to feedback@jeffclarktrader.com.