Financials' Lowest Relative Close Since March 2009

JC Parets
May 6, 2020

With Financials, arguably America's most important sector, making lower lows relative to the rest of the market, it's hard to see them emerge as new leaders. New decade+ relative lows in $XLF is not what you want to see if you think the stock market is going a lot higher. It's actually the opposite.

I look at Regional Banks and wonder, Is this a major bottom? Or is this just a normal consolidation within an ongoing trend? So then I look at momentum in a bearish regime, and its parent sector, Financials, breaking down to the lowest levels relative to the S&P500 since March of 2009:

35 is an important level of interest in Regional Banks. A break back below that would complete this consolidation, in my opinion, and offer a nice short opportunity. We only want to be short bank stocks if $KRE is below 35, otherwise it's a no touch.

Meanwhile, the Industrials closed yesterday at their lowest levels relative to the S&P500 since October of 2000.

This just doesn't add up to me getting aggressively long stocks here.

The gold miners, on the other hand, are a completely different story. We're seeing new highs relative and on an absolute basis over there. So that's where we'd rather be.

Check it out: Junior Mining Stocks

JC

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