Regional Banks May be Set to Under-Perform Larger Ones

The chart below plots the ratio of the KBW Regional Bank Index vs. the XLF.

As it rises, regional banks out-perform; as it falls the XLF out-performs.

The ratio is breaking below trend-line support and a multi-year consolidation pattern.

That break-down resembles one that occurred in 2005 which led to XLF out-performing the regional index by ~25% over the next two years.

The same may be set to occur now.

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