I think the bull case for the stock market starts with the European banks. When you talk about bull markets and uptrends, financials need to participate. There’s no way around it. If you have European banks crashing to new multi-year lows, it’s hard to have a sustainable uptrend in equities. As bearish as I am towards stocks these days, the bull case begins with this sector. It would be irresponsible of me not to recognize that.
Today we’re comparing the Financial Sector in Europe to Financials in the U.S. This is a great visual comparison that we look for to determine whether or not there is risk appetite for bank stocks. If European Banks are the ones dragging down the space, we want to see them start to outperform U.S. banks as evidence of risk appetite. So far all we’ve seen is the exact opposite: new lows, new lows, new lows. [Read more…]