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I am talking about banks. They are tired and really ain’t what they used to be, many long years ago.
I wonder whether we are about to see some major structural changes to the way banks operate. The bottom line is we have lost faith in banks and become suspicious of their dealings. Banks need to make themselves more relevant – both from an investment perspective and in client interface. Banks have lagged the major indices in recent months – just take a look at the US Bank index against the DOW:
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A classic divergence. But that is the short-term picture.
Let’s look at the US banking indicator on a weekly Elliott:
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US banks are still a third of the value they were five-years-ago and have spent the last three years range trading. Prior to that was just a big slide.
I cannot find any real upside in any bank anywhere.
I hold no banks and I ask myself if this is a time to buy banks. But the answer is no. When we see indices run as hard as they have, the risk is to the downside.
Take a look at our local WBC:
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A simple 30-year quarterly chart shows it has been just up-and-up. It will be tough for it to go higher from here.
The Finance sector makes up about 40% of our market (and about the same within most investor’s portfolios), so it will be tough to make any substantial gains these in portfolios over the next year or so.
Sometimes it is better to let money burn a hole in your pocket and this is possibly one of those times.
Enjoy the ride
Tom Scollon
Chief Analyst
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