A Quick Look at the Financials

Mar 19, 2008: 10:32 AM CST

The Financial Sector (XLF) has been featured majorly in the news recently, so let’s take a quick fly-by of this sector and see where we’ve come.

First, the shocking monthly chart:

Very rarely do you see declines of this magnitude occur this quickly (in about one year) in a major US Sector. The Financial sector is such a significant portion of the economy and stock market, and weakness here is chilling for the broader economy and market. Notice how volume has exploded since 2007, reaching sometimes above 3 billion shares in a given month.

Next, the weekly chart:

I added the volume readings to this chart (on the left) to indicate that over 1 Billion shares were exchanged last week alone – that is stellar urgency to acquire and eliminate positions.

The previous massive rally (late January) simply terminated at the falling 20 period moving average. How far will this rally go? I suspect we’ll get a test close to the $28 level, but it’s up to the bulls to take it from there.

Finally, the Daily chart:

I pointed out some key short-term divergences (one of which has just resolved) and also pointed out some simple trading entries as price mounted counter-rallies to the falling 50 period moving average. The last three days (including intraday Wednesday) has revealed massive urgency to shift positions (whether bailing out of short-sale trades or scooping up cheap shares to the long-side).

I would wait until price completed a true trend reversal (by making a higher high, and higher low and then taking out the higher high) before getting too excited.

Also, recall that a large portion of this action is due to major percentage increases in Bear Stearns (BSC) at 23%, Goldman Sachs (GS) at 17%, and Lehman Brothers (LEH) at 46% Citigroup (C) at 11% among others. The broader market, and of course the XLF sector, was helped immensely by these key stocks yesterday.

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2 Responses to “A Quick Look at the Financials”

  1. Stock Trading Secrets » Blog Archive » A Quick Look at the Financials Says:

    […] Interactive Investor Blog wrote an interesting post today onHere’s a quick excerpt The Financial Sector (XLF) has been featured majorly in the news recently, so let’s take a quick fly-by of this sector and see where we’ve come. First, the shocking monthly chart: Very rarely do you see declines of this magnitude occur this quickly (in about one year) in a major US Sector. The Financial sector is such a significant portion of the economy and stock market, and weakness here is chilling for the broader economy and market. Notice how volume has exploded since 2007, reaching […]

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