Crypto crashes while big banks flex their strength — rotate into financials
Thesis
We are connecting the immediate bullish news for major banks—like JPMorgan's massive buyback following a successful Fed stress test—with the ongoing chaos in crypto and high-multiple tech stocks. While Bitcoin crashes and Apple raises consumer prices to combat margins, big financial institutions are proving their resilience. Combining this with the fact that small caps are quietly booming suggests Wall Street money is rotating out of speculative tech and into safer, domestic financial plays.
Strategy approach
Construct a D1 long/short sector rotation strategy. Enter long XLF (Financials) and short XLK (Technology) when the ratio of XLF to XLK breaks above its 50-day moving average. Additionally, use IWM (Small Caps) as a confirming indicator: only enter the trade if IWM is trading above its 50-day moving average. Exit the trade if the XLF/XLK ratio crosses back below the 50-day moving average, or after a maximum hold of 30 days.