In what kind of shape is Banking after the week ending 2023-09-22? (Spoiler alert: now is not the time to be a hero)

Brian Degracia

23 Sep 2023 • 2 min read

Just... don't.

As noted here for a similar Real Estate look, I have no idea where this is headed. I can surmise the Banking stock-by-stock picture below doesn't portend anything great, at least for the short term. Summarizing:

Banking currently has only 1% Strongest rated stocks vs. 54% Weakest rated stocks.

As they say, it's always darkest before the dawn. Others say it's always darkest before it goes completely black.

A market this bad can always snap back, if only for some short period as bull market believers step in thinking "enough is enough." Whether this will happen, nobody knows.

Should that happen, investors might breathe a sigh of relief that a bottom is in. This is always a possibility - that a bottom could be created here.

Another possibility is that a relief rally could be a false start. Fear in the market is insidious. It can feed upon itself, as a powerful emotion infecting more people who start to panic as they see increasing levels of red on their monthly statements.

In a weakening market, caution may still be warranted when long-term risk is paradoxically and objectively "low" (because a lot of selling has taken place) but short-term risk remains high at a visceral level due to the prevailing skittishness of investors afraid of more downside and therefore quick to pull the sell trigger, which in itself could cause another selling cascade. And so goes the vicious cycle.

The above word salad means this: in summarizing the photo below, now is not the time to be a hero.

There is a LOT of red/weakening. Just because a stock hits the farthest left wall (reaches the Weakest strength rating) doesn't mean it can't fall farther, in terms of returns. A stock can stay as "Weakest" for a long time.

Always remember that a stock that has fallen 90% can fall another 90%.

As I say in every industry analyses, when I list the stocks rated Strongest and Weakest:

"... the Weakest may be prone to volatility, subject to big pops from bottom-fishing and short-covering BUT ALSO to bigger and faster falls."

I highlight the weakest in every industry analysis specifically because those stocks are prone to large "pops," and I want to highlight potential joyride possibilities for the adventurous. That is part of the value of my analysis, should one be on the lookout for such possibilities. These are never recommendations - if you play with fire, you may get burned. But they're there if you'd like. But, #dontmarryastockyoushouldjustdate.

Don't worry about missing a rally - this methodology will pick up when a stock starts strengthening. While it will not help you bottom tick anything, this methodology will flag for you when a Weakest stock (9th strongest of 9 levels) improves to Very Weak (8th strongest of 9 levels) or better. And, since stocks can rise to Strongest (strongest of 9 levels), this flagging will leave plenty of room for capturing gains.

More 2023-09-22 Banking details here.

Sign up for more like this.