Technical Alert: JPMorgan Vs. Key Banks (JPM, BAC, C, WFC, XLF, FAS)

The recent trading days have been more than interesting in the market and in the financial sector.  The big change came right at the same time that the banks looked poised for another potential breakout to the upside, but the rules of the game unexpectedly changed in short order.  To top it off, we have a very different read in shares of JPMorgan Chase & Co. (NYSE: WFC) versus its peers to the tune Bank of America Corp. (NYSE: BAC), Wells Fargo & Co. (NYSE: WFC) and Citigroup Inc. (NYSE: C).  More importantly, the JPMorgan chart flies against the two key financial ETF products in the financial sector: Financial Select Sector SPDR (NYSE: XLF) and Direxion Daily Financial Bull 3X Shares (NYSE: FAS).

It is normal to see divergence out there among bank stocks, particularly as fundamental changes come into play after any sector shocks take place.  But JPMorgan Chase & Co. (NYSE: WFC) is supposed to be the axe of the banking sector.  It is supposed to have the cleanest balance sheet of the money center banks, with the tightest of credit standards, the least amount of post-TARP government reviews, and is supposed to have the best customer base.  Yet, a chart preview using longer-term absolutes in the 50-day and 200-day moving averages actually shows that Wells Fargo & Co. (NYSE: WFC) appears as though this is a new flavor of the day for traders and investors.

Bank of America (NYSE: BAC) has also demonstrated that it at least has more durability on the charts using the major moving averages than Citigroup (NYSE: C).  The Financial Select Sector SPDR (NYSE: XLF) and Direxion Daily Financial Bull 3X Shares (NYSE: FAS) ETF products have also held up better than JPMorgan Chase. We have the JPMorgan chart below from StockCharts.com and then a table below showing the key moving averages of each bank and ETF as a comparison.

A review of the 200-day moving average as a critical juncture is one that has only been an issue for a few trading days, but it also brings trading more in-line with the days before the bank and financial crisis hit.  The stockcharts.com longer-term chart review highlights this. No trader should use one chart or one metric as a determination in technical analysis, or so we believe as being more fundamental rather than technical.  Still, this is hard to not pay attention to.

As far as what has changed fundamentally from just a few weeks ago, the list is numerous.  The Obama-bank tax, the Volcker-Rule looks closer to a new version of Glass-Steagall reinstatement, a trading-halt may be mandated or installed on a lesser basis down the road as an earnings boost, the bonus attack persists even at the banks that have repaid their TARP obligations, the tax structures appear to be on track for a higher reset in 2011, China has halted lending, and many key nations have seen their sovereign  debt ratings under question and scrutiny even more in recent weeks.  On top of that, the U.S deficit and borrowing are hitting obscene  levels.

The biggest fear here might be one of JPMorgan Chase losing its premier-status to traders and investors in favor of alternative money-center banks.  As far as calling for further break-down in the sector, that notion is still one for debate and the outcome is still up for grabs.

JON C. OGG