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Bank Stocks Have Symptoms of QE Fatigue

Tickers in this article: RF JPM BAC WFC PNC STI USB
NEW YORK ( TheStreet) -- The "too big to fail" money center banks and the large regional banks make up the 24 bank stocks in the PHLX KBW Banking Index (BKX) .

The last time I profiled these banks was on Sept. 26 in Don't Bank on Bank Stocks, Just Trade Them and since then the BKX moved up to a potential double top at $52.04 on Oct. 5 vs. its 2012 high of $52.11 on Sept 14.

The sideways-to-down pattern since Oct. 5 has created negative technical divergences on both daily and weekly charts for several members of the BKX and for the BKX as an index. The BKX made significant gains of 52.3% since bottoming in October 2011, and is up 25.9% year to date.

Fundamentally shows the Finance sector 11.3% overvalued.

The weekly chart for the BKX ended last week with declining momentum (12x3x3 weekly slow stochastic) reading of 78.28 down from 81.98 the prior week. This decline under 80 on a scale of 0 to 100 is a negative divergence.

Last Friday's close at 49.25 was just below the five-week modified moving average at 49.50. This is a technical negative and a symptom of "QE Fatigue."

Chart Courtesy of Thomson/Reuters

The daily chart for the BKX (49.60) shows declining momentum with the BKX below its 21-day simple moving average at 50.33, is just above its 50-day SMA at 49.56 and is above its 200-day SMA at 46.76. My quarterly and annual value levels are 47.55 and 42.98 with monthly and weekly risky levels at 51.11 and 53.04.

The above table shows data from covering nine stocks in the BKX.

Reading the Table

OV/UN Valued : The stocks with a red number are undervalued by this percentage. Those with a black number are overvalued by that percentage according to ValuEngine.

VE Rating : A "1-Engine" rating is a Strong Sell, a "2-Engine" rating is a Sell, a "3-Engine" rating is a Hold, a "4-Engine" rating is a Buy and a "5-Engine" rating is a Strong Buy.

Last 12-Month Return (%) : Stocks with a Red number declined by that percentage over the last 12 months. Stocks with a black number increased by that percentage.

Forecast 1-Year Return : Stocks with a red number are projected to decline by that percentage over the next 12 months. Stocks with a black number in the table are projected to move higher by that percentage over the next 12 months.

Value Level : The price at which to enter a GTC Limit Order to buy on weakness. The letters mean; W-Weekly, M-Monthly, Q-Quarterly, S-Semiannual and A- Annual.

Pivot: A level between a value level and risky level that should be a magnet during the timeframe noted.

Risky Level : The price at which to enter a GTC Limit Order to sell on strength.