Watching the Banks

[tsptalk]

I'm surprised they didn't rally with those good earnings AND a pop higher in yields today. But yeah, so far its been a sell the news reaction.

 

[Bullitt]

The underperformance by banks is a bit concerning, but it seems every time these banks report blowout earnings the market just writes it off as a "one-off".

Overall breadth has been terrible the past two weeks and there's talk of this quarter being peak earnings. Seeing markets always look forward, it's looking more and more like a market correction is due.

 

[felinecrl]

"I'm surprised they didn't rally with those good earnings AND a pop higher in yields today. But yeah, so far its been a sell the news reaction."

It's an eerie feeling with the banks. It's seems like they're just staying on the porch out of pure caution.

 

[Bullitt]

They've definitely been hamstrung by having to hold extra reserves on their balance sheets. Unfortunately, they weren't able to do as much after being allowed to cut that money loose than many were hoping.

Lending standards for homes are very high right now so the pool is small for potential clients. Prices for new autos aren't really increasing like the used autos are, so those loans aren't growing so much. Plus, any large loans will erode with inflation - if it keeps going up. Sounds like many are focusing on the credit card space right now.

Energy and Financials are not loved sectors right now. This weeks action has made many of them cheaper.

 

[Bullitt]

Latest from Argus. Banks upgraded to overweight.

We continue to believe the Fed will place greater emphasis on its employment mandate than on managing inflation to the 2% target. Rising long-term interest rates and the steepening yield curve hold several implications for investors. We do expect interest rates to reverse course and head higher over coming months as the global economy recovers. We note that a wider spread between short-term and long-term bonds is beneficial for most of the Financial Services sector, which we recently moved to Over-Weight.

 

[Bullitt]

Breakout move after exhaustion gap down, now above 50DMA. Bullish implications for entire market.

 

[Bullitt]

New all time high for XLF.

 

[Bullitt]

Another new all time high today on a breakout day.

 

[Bullitt]

That breakout didn't hold. Looks like everyone got ahead of themselves with valuations as all banks have been getting hit the past week. Even the pros got it wrong. A slew of upgrades before earnings may have been premature because none of them factored in such poor trading profits in the recent quarter. Without reserve releases, many would not have been profitable this quarter.

Rate hikes should help the banks since any interest rates higher than zero give them better chances to profit in the lending department.

 

[tsptalk]

Wow, big difference between the Bank Index and those individual large financials (XLF).

The bad new for $bank is that the F-flags eventually break down too.

 

[Bullitt]

Banks not looking too good here. H&S on weekly, Double Top (not shown) in daily, but still waiting on a break in both, which target lower prices.

 

[Epic]

Was down today over 11% at one point..... Dam

 

[tsptalk]

I thought higher yields were supposed to lift bank stocks?

Sent from my SM-G975U using Tapatalk

 

[Bullitt]

All the financials are reporting losses on their trading revenue, but I'm not sure what people expect - the whole buy anything on RobinHood with stimulus money you didn't need has been over for months now. Sometimes it's not so important how many accounts you pull in, but the quality of them. RH are not quality accounts and very likely most TD Ameritrade accounts are are on the smaller side too. Less $ to make with advisor fees as less accounts are even eligible. SCHW isn't going away though and will remain one of the big companies in the discount trading sector.

Relatively speaking, XLF is still holding up above that red line in the chart posted previously. BAC came in good today releasing more of their reserves than expected after the Russia situation which is a big thing weighing on banks right now.