DBD Strategy Daily - BANKS AND AUTOS : the weak link
US indices are still very close to their highs, and yesterday's corrections are not yet an issue for short-term trends. In Europe though, the absence of strength is a concern. Though we do not have clear signals yet, we have to underline that banks are at a dangerous place. They are already in a bearish trend, both short- and medium-term. Autos are the second concern. Though the sector is still above its support, it has had many chances to bounce off that support, but it failed to do so. The support might well cease to support soon. It would then trigger a very large head-and-shoulders pattern. Those two sectors are important symbols. Weak banks mean no real improvement anticipated for economic growth. Autos are the symbol of trade dynamism. Up to now, Trump's threats have not seriously impacted markets. Should Autos break their support, we would have the first signal that investors are worrying about the impact of trade wars.
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