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RoboStreet – November 19, 2020
Banks About To Have Their Day In The Sun
We’re entering the final stretch of 2020 with the market showing some holiday spirit. As the final recounts for the White House are underway, much of the uncertainty facing investors prior to the election has been lifted.
As it stands, Joe Biden is the President-Elect. The Fed has reassured markets they will continue QE until Main Street is back to work. Both Pfizer and Modena have announced vaccines with 90% or higher efficacy and there is rising anticipation of further pandemic stimulus funding on the way soon.
As to market technicals – the SPY sold off toward the end of Wednesday’s trading session and continues to trade in the defined range between $350 and $365. If the SPY will close below the $357 level, most likely the SPY will retest the $350 level.
And remember we’re not talking about day-trading here. I’m looking for 50-100% gains inside of the next 3 months, so my weekly updates are timely enough for you to act.
The $350 level is a key support for the bulls. I expect short-term corrections to be shallow and the bull market to continue to retest the 52 weeks high. As long as the SPY is trading above the $350 level, the SPY will break out from the current range to the upside and potentially can reach the $370-$385 level by end of November/early December.
The U.S. Dollar ($DXY) is trading below the $94 level and U.S. Treasuries (TLT) continued to trade in the downward channel. Value stocks continue to outperform and the breadth of the recent rally is impressive.
My opinion has not changed. The bull market has resumed its rally and will retest recent highs in November. I would be a buyer using any short-term corrections and use a dollar-cost averaging strategy to accumulate positions at this level.
With so much attention being paid to big-cap tech and the value stocks per positive vaccine news, there is a quiet rally being staged in the bank sector. There are a few catalysts triggering the rally in the banks.
First, the sell-off in the Treasury market shows the 10-year T-Note breaking its downtrend with the yield pushing up through the 200-day m.a. While the drumbeat of the Fed’s intention to hold interest at or near zero for the next couple of years, the bond market has other ideas.
Second, a resumption of Main Street life as we knew it before the pandemic. A return to the normal business cycle in early 2021 bodes well for increased lending activity from consumers and small businesses.
Third, as creditworthiness is restored, banks won’t have to maintain such high loan-loss reserves as insurance against borrowers defaulting. These high levels of secured funds can find their way into capital markets for much healthier returns than just earning the overnight REPO or T-Bill rate to hold cash.
The Financial Select Sector SPDR ETF (XLF) is a basket of the biggest bank, bank holding company, investment bank, asset manager, and brokerage firms where the top ten holdings make up 52.56% of total assets.
It’s an excellent barometer of the health of the sector, and from the chart below, there is clearly some bullish enthusiasm and momentum returning to what has been a sorely lagging sector. Both the 20 and 50-day moving averages have moved up through the 200-day m.a. forming a bullish “golden cross.”
As to single stock selection, my AI platform is very high on JPMorgan Chase & Co. (JPM) that has also broken out to the upside. The AI-driven Seasonal Chart shows all four probability periods showing “Higher” readings for the next 50 days.
We’ve traded JPM in our RoboInvestor advisory service over the past two-plus years and find it to be a very reliable profit generator, even if the market doesn’t cooperate. It’s a blue-chip juggernaut that makes up for lost ground in good time.
Within the RoboInvstor Portfolio, we’ve been busy booking capital gains from the recent runup for the major averages. A snapshot of our most recently closed trades for November shows that RoboInvestor members are ringing the register often.
I’m most excited to report that just over 90% of our trades going back to April 2018 make money. I do not believe there is another advisory service available in the marketplace that delivers such stellar performance at such an affordable rate.
My single best recommendation today is for every reader of this column to make the smartest trade of 2020 and sign up to be a new RoboInvestor member. Our AI tools are making ordinary investors wealth-building winners from the consistent success we are having trading blue-chip stocks and ETFs of all manner of asset classes.
In addition to buying the hottest stocks at just the right time, our AI system will have us buying and shorting commodities, currencies, volatility, interest rates, and indexes. Our AI models also signal to us when to sell, something most investors truly struggle with.
Take me up on my offer and join today. We’re collectively sojourners seeking to inflate our nest eggs by maximizing all the various facets of what the total markets have to offer day after day – and we have the system to do just that – RoboInvestor.
“I’m investing my own money in each and every stock as my AI platform identifies.”And remember we’re not talking about day-trading here. I’m looking for 50-100% gains inside of the next 3 months, so my weekly updates are timely enough for you to act.
*Please note: RoboStreet is part of your free subscription service. It is not included in any paid Tradespoon subscription service. Vlad Karpel only trades his own personal money in paid subscription services. If you are a paid subscriber, please review your Premium Member Picks, ActiveTrader, MonthlyTrader, or RoboInvestor recommendations. If you are interested in receiving Vlad’s personal picks, please click here.
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