Cyclical Rotation Pouring Into Banks (BKX, BAC, BBT, BK, C)

Higher volume and prices across the banking sector, typically associated with cyclical rotation, has been evident in the since the third week of November. An increasing number of stories about banking solvency and decreased Euro-zone risk could have marked a bottom in the banking sector, although skeptics' concerns still remain about the financial health of the sector.

With banking solvency and less Euro-zone risk, banks could have bottomed in that time period. In addition, the future outlook of banks has been trading in tandem with unemployment rate outlook determined by The Federal Reserve. Lastly, M&A activity is expected to rise within the banking sector according to FJ Capital Management.

The KBW Bank Index (Philadelphia: BKX) is a capitalization-weighted index composed of 24 geographically diverse stocks representing national money center banks and leading regional institutions (Click here to learn more) . The BKX is a way to gauge the U.S. banks that might be poised to break-out.

One-Year Performance Overview (in %)

BKX: 22.5

BAC: -10.98
BBT: 3.75
BK: 14.0
C: 39.11
CBSH: .66
CFR: 26.39
CMA: 51.25
COF: 7.7
FITB: 49.79
FNFG: 1.23
HBAN: 84.06
JPM: 2.95
KEY: 55.39
MI: 24.91
MTB: 32.82
NTRS: 11.3
PBCT: -17.8
PNC: 11.97
RF: 26.78
STI: -2.89
STT: 14.83
USB: 20.85
WFC: 16.92
ZION: 80.48

The mean of all 24 banks percentages equals 22.72 (not including the weighted average effect). The stocks that were highlighted have begun receiving positive sentiment among investors.

Technicals

The KBW Bank Index (BKX) closed yesterday at 52.26.
50-Day Moving Average: 49
100-Day Moving Average: 46.8
200-Day Moving Average: 47.1

On 12/16/2010, KBW tested its 50-DMA, but bank buyers came in and pushed it upward 6.15% at yesterdays close. The 50-DMA now has an upward slope, while the 100-DMA and 200-DMA have remained flat since the beginning of December. This indicates the beginning of a bullish trend within the sector.