The chart above is an updated version of the one I posted a couple of months ago under the title, “Fat Bottom Banks?” The banks rallied after that earlier post but not to the degree I anticipated they might.
Over the past week or so, however, the banks have rallied roughly 70% off their lows and have now clearly broken the downward channel on the chart. Amazingly enough, they are still 40% below the 200-day moving average.
The easy trade, the reversion trade, is now pretty much over, however (as we got the 50% move and then some). Still, the path they take from here will tell us much about the strength of the stock market’s current rally.