(Premium) April Financials Outlook
You might have heard, but there was a bit of turmoil in the financial markets last month. Two S&P 500 banks were placed into receivership with the FDIC during March, driving Financials to the bottom of the barrel when it comes to year-to-date sector returns.
We’d been watching Financials closely for a bullish breakout on a relative basis. But they just couldn’t seem to get through resistance, so we hesitated to upgrade our view. Waiting for confirmation proved prescient – it took only a week for Financials to go from ‘breakout watch’ to ‘breakdown’.
Fortunately, the sector is still above it’s 2007 highs. How bad can things really be if the worst sector of the year is still above last year’s lows? If that changes, don’t expect stocks overall to continue moving higher.
The sector’s weakness was most pronounced in the banking industry (for obvious reasons). Bank of America did break last year’s lows, and so did most of the regional banks.
There will certainly be some huge gains to be made when banks recover – indiscriminate selling always leads to great bargains. But we aren’t in the business of catching falling knives or trying to swing for the fences with an 0-2 count.
This is a time to find relative strength and look for base hits. Cboe is thriving during the volatility of the past few weeks – they’re trying to break out of a 5 year base. If this stock is above 130, we like it with a target of 160, which is the 161.8% retracement of the 2020 decline.
We’ve also like Globe Life for a long time. Sector-wide selling has brought GL back to the site of the breakout, giving us another chance to buy it with a well-defined risk level. If it’s above the 2021-2022 highs of 108, we want to be long with a target of 138.
View the rest of our April outlook:
April Technical Market Outlook
(Premium) April FICC Outlook
(Premium) April Information Technology Outlook
(Premium) April Communication Services Outlook
(Premium) April Consumer Discretionary Outlook
(Premium) April Industrials Outlook
(Premium) April Financials Outlook
(Premium) April Energy Outlook
(Premium) April Materials Outlook
(Premium) April Health Care Outlook
(Premium) April Consumer Staples Outlook
(Premium) April Real Estate Outlook
(Premium) April Utilities Outlook
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