Look For A Potential Entry In This Bank ETF (KBE)
Wednesday was a solid day for stocks. Led by the Nasdaq, the major indices gapped up at the open and spent the remainder of the day consolidating near session highs. By the closing bell the Nasdaq had gained 2.3%, as the Nasdaq 100 added 2.7%. Both the S&P MidCap 400 and the small-cap Russell 2000 ended higher by 1.8%. The S&P 500 tacked on a healthy 1.4% while the Dow Jones Industrial Average was the day’s laggard. The Blue Chip index underperformed as it added only 0.7% on the day
Market internals ended the session on a bullish note. Volume raced higher on the Nasdaq by 1.0% and on the NYSE by 10.0%. Advancing volume outpaced declining volume on both exchanges. On the NYSE, up volume topped down volume by a ratio of 3.6 to 1, while on the Nasdaq the ratio ended the session at 3.8 to 1 in favor of advancing volume. Based on price and volume action, yesterday was clearly an accumulation day on both exchanges and a continuation day for the S&P 500. We have now returned to a buy signal on the S&P 500. Since the Nasdaq is only two days removed from its most recent swing low, yesterday’s strong price action did not result in a bullish signal for this index.
The SPDR S&P Bank ETF (NYSEARCA:KBE) gapped up and formed a reversal candle as it tested both its 20-day and 50-day Moving Averages. KBE offers a potential buy entry above the ten day high of $23.48. Alternative, KBE could present a buy entry on another undercut of the 20 and 50-day moving averages. Under this scenario, KBE would have to form another reversal candle that would provide the pivot for the potential entry.
Yesterday, we took profits on two stocks, $DUST and $SOXS, both of which hit our trailed stops when they gapped lower on the open. Our sole open ETF position, EPU, held support of its two day low yesterday and remains intact. Based on yesterday’s market performance, we are now one step closer to having a full-on buy signal for the broad market. If the Nasdaq can repeat today’s performance at least four days removed from the April 23rd low of 2,946, then we will also have a buy signal on this index.