Summary
BAC tends to overreact to bad market conditions and is currently trading well below its excess returns valuation.
I find BAC to be undervalued to the tune of 10%.
I offer an options trade on BAC's undervaluation.
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In October, I wrote that the risk of a recession is rising. One of my market crash prediction indicators was showing an extreme signal. This has since reversed:
(Source: Damon Verial; data from Quandl)
The copper/gold/yield correlation was strongly negative for an intermittent period but is now normalizing. A fall in this correlation is often necessary but not sufficient for a bear market. However, it seems my concern was overdone, and copper/gold is no longer in direct divergence with the yield rate:
