Friday, December 21, 2007

A Closer Look At the Financial Sector

We've seen some interesting developments in the financial sector over the last few weeks. The primary development has been cash injections from foreign investors. This isn't the first time we've seen this happen. Citigroup was a beneficiary of this trend a bit ago. However, these cash injections haven't done a great deal for the financial sector.

The XLF ETF is still clearly in a downtrend. Note that

-- prices are 16.5% below the 200 day SMA.

-- prices are below all the moving averages

-- all the movings averages are heading lower

-- prices are still centering around the long-term downtrend.

The insurance sector isn't in the best shape either. Notice

-- prices are 7.8% below the 200 day SMA

-- the shorter SMAs are below the longer SMAs

-- all the SMA are headed lower

Regional banks are in the same boat

-- prices are 13.66% below the 200 day SMA

-- prices are below the moving averages

-- all the moving averages are moving lower

The capital markets long-term chart shows the industry in a downward slanting consolidation pattern

The six month chart shows

-- prices are hovering around the 200 day SMA

-- the shorter SMAs are below the longer SMAs, but

-- the SMAs are bunched up, meaning this segment of the market is looking for direction.

The only chart that looks good is the capital markets sector -- and that's an extremely relative term. That sector looks good because all the other sectors look pretty terrible. In short, this sector is still in terrible shape.