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The stock market is stuck in neutral, with several sectors failing to keep up. Call it a lack of leadership.

One key sector that has really been struggling is banking. And let’s just say that the economy needs healthy banks and a healthy financial sector.

Today’s chart tells us that we may not be ready to turn around just yet. Below is a chart of the KBW Bank Index (BKX) compared to high yield spreads (lower pane).

As you can see, bank stocks tend to find a quality low when high-yield spreads blow out. Right now, spreads are only at 4.74. Let’s just say that the spread is far from prior levels when the bank index formed a quality low.

Could banks turn higher from here? Sure. But something tells me that it’s okay to be cautious on banks right now.

(Click on image to enlarge)

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