Explaining My Amazement About Those Turning Bullish On The Banking Sector Now

Recent price action
With the Nasdaq continuing higher this past week, it has now reached our minimum target we were looking for before a pullback may be seen. But, I think the XLF may be providing us with certain clues about how 2018 may turn out. And, it may not be as rosy as many believe. Well, at least the first half of the year.
Anecdotal and other sentiment indications
Interest rates are rising. Tax obligations will likely be dropping. And, many believe this could be a wonderful environment for our banks to thrive. In fact, I am seeing many Wall Street analysts picking the banking sector as one of their favorites for 2018. Well, I certainly cannot concur, based upon what I am seeing in my charts, which provide insight into market sentiment.
As markets move higher and higher, for some reason, people turn more and more bullish. I mean, the drive that most consumers have to find the best price for the goods and services they desire is conspicuously absent from the greater investor community.
Why is it that when you want to buy a high priced product, you will do extensive research to find the lowest price available, yet, when it comes to stocks, most will only buy after it has risen substantially? Have you ever considered this question?
For those of us who have studied markets, we would understand that the reason is because financial markets are emotionally driven, rather than logically driven. As prices rise, investors become more and more convinced that they will simply continue to rise in a linear manner. And, when the greatest percentage of investors maintain this belief, that is often the point in time when the market changes direction.
And, I am seeing a potential turn setting up into January of 2018.

This post was published at GoldSeek on Monday, 18 December 2017.

 

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