What's up with the banks? These charts show reasons for caution before buying as banks also issue additional equity

So what's up with the banks while I was out at TPC-Sawgrass today - the day after the banks' stress test news was "revealed" last night? Generally looks like they regained ground lost yesterday (the hook that probably baited some shorts going into the "news"), maybe a bit more, but there are several reasons to think twice before buying the banks now. Fundamentally of course, one must be certain whether or not the banks' prospects support higher stock prices in the face of additional equity issuances that will dilute the existing common stock. Technical analysis shows reasons for caution too. First, the banking index ($BKX) finally went to and even somewhat above that 41.80 target I'd mentioned a couple of times (after having hesitated and consolidated in recent days first). Based on my target having been a C=A symmetry level, we'll have to watch carefully whether or not this index starts reversing down again on Monday. So we can consider the 41.80 level as a sort of pivot that can send the BKX either down or up. But the advance is also meeting chart resistance at its 200-day moving average - a moving average being tested by a number of other indices about now. The weekly chart shows that the BKX has now retraced a Fibonacci .382 back to its swing high of September 2008 - the high that was right before the financial crisis really hit hard and sent this and other indices crashing. Furthermore, as I was updating the markings on my weekly BKX chart, I noticed that it moved into a downtrending line I'd marked on this chart a long time ago. The downtrending angles of this line parallel other lines that have marked swing low points at many times during the banking index's bear market over the past two years.

What about individual bank stocks? I've included daily charts of three of them below (after the BKX daily and weekly charts) - Citigroup, Bank of America, and Wells Fargo. Wells Fargo had a surge in volume today, but I'm surprised it didn't keep the indicators looking more positive rather than looking just a bit tired into today. Citigroup did not even manage to break above $4.48, which is a warning that it may not break out of this consolidation to the upside (or a more optimistic interpretation might be that it needs more consolidation first). Bank of America also had an inside day. Under the circumstances - both the fundamentals, and the technicals I've reviewed here - an inside day right after the "good news" was "released" isn't enough to make me feel all warm and fuzzy about buying C, or BAC, or the sector ($BKX). Not unless and until they can show the chart strength to push higher. Because the risks of either new lows, or a continued consolidation, make the idea of plowing money into the banks look unpalatable to me without such a demonstration of strength. (I.e. - if they can move up then I'm with them - if they hesitate or weaken off here, then I'm not!)

I know there are plenty of people who have been selling or shorting this sector. For these folks, I would say, these technical levels are caution flags saying that yes, the banking sector may be in for some more pain. I don't know that they are enough to believe that the banking index, or particular bank stocks, must go to new lows. There is one Elliott Wave analyst out there (maybe more than one) who views the banking index as completing a wave four and looking for a fifth wave to new lows. But it's also possible that any move down could be a pullback, such as to the 50-day moving average, before the bank stocks come back again to push above these technical levels. So I'd have to recommend that anyone taking a selling-type position consider what price levels to TMAR (take money and run) if a pullback does show up; and, honor stop-loss levels in case these stocks decide to break above these levels for even higher rally levels.