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The above chart reflects a ratio I created a few years ago for Premium Members. The blended ratio has been awesome for picking major highs and lows in the banking industry.
I then apply a unique relative momentum index to the blended ratio to create the indicator in the upper right third of the chart. Since 2008 the relative momentum index has reached the overvalued level three different times… resulting in declines in the banking index of 22%, 37% and 75%., which had large impacts on the S&P 500!
What has my attention right now is this…the momentum indicator is now MORE OVERVALUED than the three times cited above! With this indicator at current levels, what happens in the near future in Banks is really important!!!
This ratio and indicator I created were put together to help us with portfolio construction only…. its not about being bullish or bearish.