Will Bank Stocks Join The Party?

For Financials, the struggle is real. This is the Financial Sector Fund still stuck below the 2007 highs before the Financial crisis. This is 12 years of zero progress:

The question really becomes, when can these things get going? I like to compare different industry groups within the larger sector itself. In the case of Financials, I include Broker Dealers, Insurance, Regional Banks and the Finance Reimagined Fund that does not include any banks.

The trend here in a lot of them is up. It's only the Regional Banks that are trending lower. I find it encouraging that the $KRE relative to the S&P500 looks like it's making a turn for the better. I really like this bullish momentum divergence on the recent lows that could spark a move in regional banks to catch up to the rest:

The performance since early May (or lack there of) really stands out. Regional Bank stocks are the real losers here. It's not even close:

It will be interesting if Financials can get going. The market depends on them. The correlation is consistently very positive:

If this is the breakout in stocks that we think it is, I believe Financials are going to have to participate. More specifically, we're watching the Regional Banks. If they can get going, I think the Dow could have another 3000 points of upside. S&Ps to 3300 makes sense in that scenario as well.

If the S&P500 and Dow Industrials lose those former highs from early 2018 and fall back below, we'll be looking at the Regional Banks as a relative loser to pick on and take advantage of on the downside. I think this is the lower probability outcome and still believe the path of least resistance is much higher from here. So we'll be paying close attention to these bank stocks as confirmation that our thesis is correct.

That's what is on my mind today.

What are you thinking about? Let us know!

JC