Financials are what we’re watching very closely this week as a warning of a more substantial stock market correction throughout the summer.
Our strategy has been to buy stocks that are going up. That’s worked well. But if you noticed, that has NOT included financials. It’s been mostly in the Technology, Internet, Social Media, Biotech & Mobile Payments sectors. That has been our go-to universe during this multi-month rally in stocks.
However, even though we haven’t been buying bank stocks, that doesn’t mean we just ignore them. Quite the opposite, in fact. If you recall, it was the bank stocks that helped us get so bearish in early February, well before any market crash. We are focused on this group again today for the exact same reasons: Risk Management.
Here is a chart of Financials flirting with that 23 level. That represents the former highs from April. If we’re below that, the risk in here is down, and not up: [Read more…]