Quarterly earnings have been trickling in all week, but the real earnings season is just getting underway today with JP Morgan (JPM) and Wells Fargo (WFC); the first of the banks out with results. Breakout spoke with Mark Minervini, author of Trade Like a Stock Market Wizard, about tips on how to trade the financial sector over the next few weeks.
"I have a few rules. One is never buy the story and never buy the fundamentals without some confirmation from the price itself," he says in the attached video. So far in 2013 the financials have been confirming a rally and then some. The Financial Select SPDR ETF (XLF) is up over 13% year-to-date, easily besting the S&P 500 over the same time periods.
With more than 100% gains from the lows of 2009, Minervini has grow "a little suspicious" of the financial sector and what he calls the "growth cyclicals" in general.
"After you've been running up for a couple years I think it becomes more of a trading market," Minervini offers. While stocks are still making nominal highs he's seeing a small correction taking place in the form of rotation from leaders to laggers, suggesting it's a little late to start buying the stocks that have been leading the way higher.
The best case he can offer the bulls is that there's a low rate environment and lack of much in the way of international competition for assets. It's a combination of "don't fight the Fed" and "the best house in a cruddy neighborhood" market drivers. They may be trading cliche's but that doesn't mean they haven't made investors plenty of money.