The popular S&P bank-tracking exchange-traded fund just logged a unique streak of wins for the first time this year, though some say the recent momentum could be nearing an end.
The KBE, comprised of more than 70 large and regional banks, was higher on Wednesday for the fourth straight session. Tuesday's close marked the third straight session in which it rose by 1 percent or more — something it hasn't done since last December's four-session 1 percent-plus winning streak.
This upside has coincided with a rising yield on the 10-year Treasury note, which is generally seen as a positive factor for the lenders.
The exchange-traded fund has benefited from the recent positive performance by regional banks and a relatively strong economic backdrop, but that should fade in the near term, said Max Wolff, chief economist at Disruptive Technology Advisers.
"I think the notion here is that we're going to have a gently rising interest rate environment, going up less quickly and less far than we had originally thought, and that there's still pretty strong macro sentiment out there, a pretty strong consumer sentiment and consumers are adding debt. We do agree with all that," Wolff said Tuesday on CNBC's "Trading Nation. "
However, he thinks that strength will come to an end in the next six to 12 months, what he called the "peak of the cycle," at which point he believes accrued debt will become more apparent.
"While we do think there is some more gas in the tank, not so sure you'd want to be stuck long this all for terribly long," Wolff said.
But when it comes to individual names within the group, he likes Bank of America, which he believes is "advantaged by some distress for some of its peers, and probably unloved enough that it's not a bad risk-adjusted return."
Though banks have gotten a boost in the last week, the group is still down on a year-to-date basis, and will likely move lower, said Evercore ISI's head of technical analysis, Rich Ross.
"We came into the year with a lot of fanfare in terms of 'Trump trades' and reflation, et cetera, and the air has come out of all of those trades … banks really taking the brunt of it as interest rates have moved from 2.60 [percent] down to 2.05 [percent] just recently," Ross said Tuesday on "Trading Nation."
As yields have risen modestly — on Wednesday the 10-year Treasury yield was just below 2.20 percent — the banks have rallied, but the KBE on a technical basis is a chart that "can't get out of its own way."
More granularly, Ross said, with each passing day "it looks more and more like a nine-to-10-month distributive top that ultimately resolves itself lower. It would take a break below the $40 level for that KBE ETF to generate a confirmed sell signal, but there's little in the downtrend or the chart of yields which would suggest that's not where we're going."
The KBE was modestly higher in Wednesday trading, up 0.15 percent.