FXCM's US Banks basket includes equal weighting of JPM, BAC, WFC, C, and COF. Given that JPM, WFC, and C released their Q4 earnings before the market opened today, the US Banks basket makes for an interesting analysis. JPM's EPS beat estimates coming in at $3.33 ($3.01 - estimate). However, this includes a release of $1.8bn in loan reserves, without which it would have missed the estimate. WFC's EPS came in at $1.38 (beating the forecast of $1.13). Citigroup disappointed with a 26% drop in net income from a year ago, blaming an 18% increase in expenses for the quarter to $13.5bn.
The chart below shows the daily US Bank time frame on the left and the hourly on the right. On open the US Banks basket gapped down to the S3 pivot. However, it remains in the bullish zone between the upper blue and upper red bands on the daily. The rotation into a general contractionary monetary policy by the Fed tends to be positive for banks because they're able to steepen their yield curve, in terms of how much they charge for loans and how much they pay for borrowings. As such, S3 seems to be acting as good support. If the EMAs cross positively and the stochastic moves upwards towards 80, it may be suggesting a "buy the dip scenario." Thus, we're keeping an eye on the aqua ellipses to see if these triggers pull.
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Senior Market Specialist
Russell Shor joined FXCM in October 2017 as a Senior Market Specialist. He is a certified FMVA® and has an Honours Degree in Economics from the University of South Africa. Russell is a full member of the Society of Technical Analysts in the United Kingdom. With over 20 years of financial markets experience, his analysis is of a high standard and quality.