The US Banks continued their bullish move today and show no signs of slowing up anytime soon. The KBE broke major short term resistance at $21.74 to close at $21.88 and are at new highs since last December. The banks were so completely oversold and still have such a long way to go to attain appropriate value after earnings return to normal. Since markets look forward they are definitely seeing much more normal earnings in 2010. Add on top of that the large amount of shorts on some of these obliterated stock prices and the catalyst with a short squeeze is starting to happen. The next serious level of resistance is around $25.
My theory that the short squeeze is happening is proved by the weaker more heavily shorted banks making the largest gains since our buy signal on the US banks. Regions Financial is up 30.3% Bank of America is up 32.5% , Huntington banc up 22.5%. Even Citicroup is up 30.5% over the past 2 weeks. Names like Goldman Sachs, Wells Fargo and JPM Morgan have moved up as well but not as much as a percentage than the depleted and more heavily shorted bank names.
Todays move higher signaled that the move in the bank stocks is not done and will continue higher through August. Bull markets often climb a wall of worry and they are moving on that wall right now. September may provide us with the correction we are looking for. But until then, momentum is definitely with the bulls.