Big banks just passed their stress tests with flying colors while tech wobbles —
Thesis
The Federal Reserve gave every major bank a passing grade on its stress tests, allowing giants like JPMorgan and Goldman Sachs to unleash $50 billion in stock buybacks and dividend hikes. While the broader S&P 500 sits at a dangerous technical cliff and tech stocks sell off, the banking sector is flush with cash and returning it to shareholders. Additionally, Trump's recent backing off of the Fed chairman suggests potential rate cuts ahead, which usually helps banks' profit margins.
Strategy approach
Build a relative-strength rotation strategy on XLF vs QQQ using the D1 timeframe. Enter long XLF when its 20-day price performance is positive while QQQ's 20-day performance is negative. Exit when QQQ's 20-day performance crosses back above XLF's performance, or after a 30-day hold.