Market Minute: Next Week, Big Banks Kick Off Earnings Season

Former President Jimmy Carter’s official state funeral and National Day of Mourning is today, which means equity markets are closed after major indices eked out a modest green day yesterday. Looking ahead to tomorrow, traders can expect the Employment Situation report at 8:30am ET as well as a few earnings names to watch out for in Constellation Brands (STZ), Delta Airlines (DAL), and Walgreens Boots Alliance (WBA) in the morning. But many traders are likely focused on next week, as banking behemoths and their smaller regional cousins will once again kick off another earnings season.

The action for the financial sector begins on Wednesday, Jan. 15 with JPMorgan Chase (JPM), Wells Fargo (WFC), Blackrock (BLK), Citigroup (C), and Bank of New York Mellon (BK) reporting earnings during the premarket. Next, Bank of America (BAC), Morgan Stanley (MS), PNC Financial Services (PNC), and U.S. Bancorp (USB) continue the flurry of activity on Thursday, Jan. 16. Finally, the week will close out with smaller institutions like Truist Financial (TFC), Huntington Bancshares (HBAN), and Regions Financial (RF).

In light of the heavy concentration of companies reporting in these sectors at the same time, traders may be interested in examining the broader picture through the SPDR Financial Sector ETF (XLF) and the SPDR Regional Banking ETF (KRE). The charts are similar; both are experiencing a slide off their 52-week highs with KRE down about -14% and XLF down about -6% off their late November highs.

XLF currently finds itself sandwiched between its 21-day and 63-day Exponential Moving Averages in a narrow range of about 48.27 to 48.78. Bulls managed to hold the previous highs of around 47.60 during its recent downswing as price has consolidated in a short-term triangular pattern. Momentum also is slowing, as the RSI is below 50 and exhibits a matching triangular shape as traders brace for the upcoming heavy earnings week. Potential upside resistance could be close, as the yearly Linear Regression Line and a notable volume node line up between about 49.25 to 49.50. Beyond that, the highs of 51.62 are the next area to watch. To the downside, a potential foothold could be found where the yearly -1 Standard Deviation Channel lines up with another volume node near about 45.50.

The picture looks somewhat more bearish for KRE, as price is significantly below its own 21-day and 63-day EMAs, which are clustered together near 61.70. This provides an obvious inflection point for resistance with the yearly Linear Regression Line just above near 62.80. To the downside, volume picks up around the 58 level and then the -1 Standard Deviation Channel is near 56.60.