For all the red on Tuesday, Wednesday reversed course. Outside of healthcare, utilities and consumer staples, the heat map for the S&P 500 looked like a perfect summer lawn. Shades of green and smiles all around.
A broad-based rally is precisely what the doctor ordered. Yesterday, I talked about the Invesco QQQ Trust (QQQ) carrying the overall market, so seeing the strong action across almost every sector and every market cap might lift buyers' spirits a bit.
Rotation out of precious metals and Treasuries is what I'm seeing. Given the strong selloff in gold and long-dated US Treasuries, I'm not ready to declare that this is new money moving in from the sidelines.
But could we have the long-awaited bottom in the SPDR S&P Regional Banking ETF (KRE) ?
This ETF traded as high as $65 in February and now sits under $40. We've witnessed multiple regional bank collapses, a few sad rally attempts and sentiment hitting a low that I haven't felt since the financial meltdown back in 2008.
If KRE pushes above $40, I'm looking for a quick move into the $43.50 area, right around the 50-day exponential moving average (EMA).
The 7.36% move yesterday helped KRE close above the 21-day EMA for the first time since February. That's significant given the last two attempts at breaking above that level failed. Ideally we'll see another day above the 21-day EMA, with the 10-day EMA now acting as new support.
A closing of the debt ceiling issue, along with the perceived notion the Fed is done raising rates, could give this ETF power to move much higher, more like $50. Still, even without those issues being settled, I am looking at this one for a long side trade to around $43 with the 10-day EMA as a stop loss once the ETF trades above $40. More conservative traders may prefer a close above $40, but we're only one day into the move so I don't view it as too late to buy. If today were day three, I might hesitate, but I'll watch the action on the open before making any moves.