The stock market is stuck in neutral, with several sectors failing to keep up. Call it a lack of leadership.
One key sector that has been struggling is banking. And let’s say that the economy needs healthy banks and a healthy financial sector.
Today’s chart tells us that we may not be ready to turn around just yet. Below is a KBW Bank chart compared to high yield spreads (lower pane).
As you can see, bank stocks tend to find a quality low when high-yield spreads blow out. Right now, spreads are only at 4.74. The spread is far from prior levels when the bank index formed a quality low.
Could banks turn higher from here? Sure. But something tells me that it’s okay to be cautious on banks right now.