Underscoring KRE’s sensitivity to fluctuations in interest rates is this factoid: A typical 1% move in 10-year Treasuries usually works out to be a 0.44% move for KRE’s holdings. [Regional Bank ETFs Look for Support]
The $2.2 billion KRE applies an equal-weight methodology to its 80 holdings, meaning the ETF is not dominated by just a few bank stocks as so many financial services are. While equal weighting has proven advantageous for scores of ETFs, KRE’s woes and its status as an equal-weight fund underscore broader weakness for regional banks.
No stock accounts for more than 1.58% of KRE’s weight and only six have allocations above 1.45%.
“So as far as KRE is concerned, we want to see a close below $36.80 for confirmation. But remember that we would only want to be short below that level. These types of patterns are notorious for whipsaws, so keep that in mind. I really think this one breaks. We’ll see,” added Parets.