The Commonwealth Bank of Australia (CBA)  is the largest stock listed in Australia, with an Australia 200 index weighting around 9.5%. It is also highly correlated to the other major banks - and ANZ, CBA, NAB and WBC combined account for around 29% of the index. Where CBA goes, so do the other banks, and so does the index.

And the CBA chart is sending a warning signal:20150519 cbaThis weekly chart shows the long term uptrend that more than doubled CBA's share price. The recent pull back brings CBA close to the long term trend line, currently around $80. A fall through this level could spark a stampede of selling. There is long term support around $72, but selling through that level would bring $50 into view!

All of this may never come to pass. If CBA bounces off $80 it will look positive, and possibly set up for an eventual test of the all time highs.

Many are pointing to the dividend yields on offer as an argument for support at current bank share price levels. There are two problems with this. The recent quarterly reporting from the banks shows earnings growth is slowing, introducing doubts about the sustainability of current dividend yields. Secondly, the global sell off in bonds is reducing the attractiveness of the yield play.

Anecdotal evidence points to many investors being narrowly concentrated in the top twenty stocks, meaning the bank trade is very crowded. When a crowd rushes for the exits, things can get ugly.