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Banking sector slipping lower

The banking sector appears set for more losses in the weeks to come, having dropped below the 4550 region early in March.

The extended troubles of the banking sector are well-known. Lloyds and Royal Bank of Scotland labour under state control, Barclays has come under fire for bonus payments, and even HSBC and Standard Chartered – which are in much better health – have been hit by volatility in emerging markets.

Bank shares are often a good proxy for risk appetite, and the dismal performance of the sector so far in 2014 (down 9.4% versus a drop of 2.46% for the FTSE 100) shows that investors remain skeptical about the outlook for equities.

The recent bounce notwithstanding, the current move lower looks set to continue. Having definitively broken the 200-day moving average in November, they have made a series of lower lows. The 4550 level which held in April and June 2013 has given way, and we now look towards the 4300 area.

Although the sector has rallied out of oversold levels, the 50- and 100-day moving averages are also pointing lower, and any rally higher from current levels would run into the descending trendline around 4550. 

Banks chart

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