EarningsBeats.com Digest

Published: Mon, 08/26/19

EarningsBeats.com Digest for August 26, 2019

Avoiding Strength in a Weak Group

Sometimes we see relative strength leaders, but we simply can't touch them. Why? Because their industry group is so weak and the macro environment is too unfavorable. Bank stocks are a perfect example. The 10 year treasury yield ($TNX) has been in freefall and rapidly declining yields are a huge negative for net interest margins in banks. We have banks on our Strong Earnings ChartList, but we're waiting for a more favorable environment to trade them. Ally Financial (ALLY) is a great stock within the space, but we have to be patient:

The above chart helps to explain why I typically follow industry group relative strength so closely. There are exceptions to the rule where a stock is incredibly strong vs. the S&P 500, so I ignore the industry weakness, but banks need to see interest rates at least stabilize. Clearly, with the trade war and the Fed's non-transparency, banks are too risky to take a chance with currently.

Tom Bowley

Chief Market Strategist
EarningsBeats.com

Better Timing. Better Trades.