PNC Financial kicked off regional bank earnings with a mixed report. Freedom Capital Markets Chief Global Strategist Jay Woods breaks down what price levels he is watching for the regional banks. For the broader market, with the Dow Jones Industrials Average and the Dow Transports making new 52-week highs, Woods says "that's as bullish as you can get" for stocks.
Video Transcript
- PNC kicked off regional bank earnings this morning with a miss on revenue. But check out the stock action. Is this a sign of more things to come for the sector. Joining me now is Jay Woods, Freedom Capital Markets chief global strategist. Jay, great to see you here. I'm looking at some of the-- well, if we can go to the Wi-Fi interactive. Let's just show the regional banks that we have up here. This is only what's happening today.
Green across the board despite the PNC miss. And guess what, here's a look at the last month. Now, you take a look at the year to date, well, it turns red there. But is this saying maybe that PNC results showing that we've finally taken the-- turned the corner here?
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JAY WOODS: Yeah. We've been looking for some sort of all clear signal for a while, and as a technician we follow price action. And there's nothing more telling right now than the price action we're seeing in PNC. The news was bad. They missed. And what did it do? It opened lower. It reversed filled that gap, and then it broke out above 130.
Watch this 130 level. I mean, you use it as a stop, if you're in the stock right now. If it can close above there today, it's got a lot to reverse, and that leads to the rest of the regional sector. You know, we talk about the Keefe, Bruyette, Woods index, the BKX, I always get that symbol wrong. I'm a little dyslexic on that one. But watch the 86 level on that. That is really indicative of what happened during the regional banking crisis that started in march. We haven't been able to really lift our head from that. We have a lot to reverse, and we're seeing it. Charles Schwab.
- Yeah.
JAY WOODS: There's a stock that just broke out above 60--
- Up to-- its 200 day moving average.
JAY WOODS: --right to its 200 day moving slightly above it as we speak. Price action is great and there's a lot to reverse. So I'm watching a lot of these regionals right now. Surprised with the action in PNC. But only price pays. And price right now is telling us, we've reversed, something's going on, and they're shaking off this bad news.
I'm looking at Comerica, watch the $50 level there. Fifth Third, $28 level. They're touching it as we speak. US Bank 37, 37.5. Key Bank, a lot to reverse, watch 12. And then PacWest, you know, that was one that was rumored to be going away for a little while. Still hanging strong. You know, has a ways to go. But these are stocks as you showed in your first heatmap, going back a year. There's a lot to reverse. And in this, kind of, environment, people are chasing performance, and the laggards are picking up bids, and we're seeing it right now with the regionals.
- Yeah. I mean, I was jokingly saying last week, well, we got all these Meme stocks finally in favor again. That must be that the end is either here, or it's just at the beginning of something that has swept up everybody in incredibly bullish momentum. I'm wondering about the latter, Jay, because we're seeing transports breaking out to the upside, the Dow Industrials are a little bit lagging. But let's talk some Dow theory here.
JAY WOODS: Yeah, good old Dow theory. The things that make and the things that take. When historically-- and I know people are going to be like, yeah, but that was before tech. That was before-- you know, things have changed. But it has always proven true. If you're making new highs in the Dow Jones Industrial Average. And now which we just hit a 52 week high live on air. We did that. And the Transports has had 52 week highs.
They're both about 5% to 6% away from all time highs. If both these indexes are making 52 week highs all week, all time highs, that's as bullish as you can get. And over the next 12 months, this is not just going to be the top. Making new highs doesn't usually signify a top, signifies a secular trend that is changing. And we are in a technical bull market 20% off the October 13th lows. But now we're seeing momentum switch into two of the sectors you want to see lead.
And then if you look at the Dow, before today, I don't know where we are at this moment, because things are doing so well. But 14 of the 16 components of that index were down year to date. So they have something to reverse, and there are two in particular-- Amgen, UnitedHealthcare. Technically, a lot of work to be done, but a lot to reverse. UnitedHealthcare had a nice earnings report, it gaped higher. It's got some room to run just to get to it's 200 day moving average. That is the biggest component in the Dow alone. That should take--
- Because of it's price.
JAY WOODS: Because of its price weighted index--
- That's the way it is.
JAY WOODS: --tend to forget that.
- Well, if we-- yeah, we got the Dow Jones Industrials heat map up, year to date results, and you can see more green than red. More dark green than dark red. So definitely bullish on that front. And let me just pull up another chart here. This is the Dow, you can see really big break to the upside here. And this is the Industrials. This is kind of, what I was waiting for today. That move yesterday a little bit not convincing.
But here's the Industrials. Let me put this on a two-year. Stick with me. Here we got the Transports, those broke up a few days ago. We got XLK up to record highs. We got home indexes, home indices and ETFs at record highs. We got semiconductors at record highs. Industrials, heading towards if not at record highs, and then value. You put this all together. That's a lot. That's pretty broad based, it would seem.
JAY WOODS: Yeah. And watch Russell. The Russell looks like it's on a march to 2000. It still has room to go. Regional banks are definitely helping the Russell today. But new highs are not indicative. You know, forget the headlines, forget what you're seeing right now. There is a momentum behind this rally. We do have seasonal headwinds to deal with. I don't think it's a straight shot to all time highs in the Dow or the Transports here.
- Or the small-caps.
JAY WOODS: Or the small. No, we have a ways to go. But the momentum is clearly in favor of the bulls. There is a lot to reverse here. And what are people doing, they're rotating. And the rotation, the Industrials, the XLI broke out 2, 3 weeks ago, and the momentum continues. Now the Dow, I think that momentum should continue for a few more weeks, and who knows, maybe next time I'm back we will be talking all time highs.
- We got another-- we got time for another one. Any takers, any sectors you want to talk about that we didn't cover yet?
JAY WOODS: No, I mean, I think right now the story is in the regional banks. The Industrials, they broke out 2, 3 weeks ago. Watch Boeing. Boeing in that sector alone-- yes, it's also in the Dow. But that has a lot to reverse. If Boeing can snap out of this little consolidation-- and it may be as we talk, because a lot of things have changed.
Boeing, I think, could lead us on another leg higher if there was one individual stock within the industrial sector, and the SPDR select sector to the XLI, that I think would be the tell. And then the Transports, they continue to just impress. The cruise lines are having another fantastic day, even though there was a downgrade in Norwegian. So right now the tide is literally lifting all the boats, and those beaten down sectors, people are rushing for it.
You mentioned the Memes, they look good. A lot of Cathie Wood names have based and broken out. ARK fund.
- It's about time. Yeah. I mean, you take a look at the most shorted, it might as well be the ARK component less right there. But things definitely turning up on so many different fronts. Jay Woods, always great to see you here. Appreciate you stopping by.
