Thursday, June 19, 2008

Financials Still Under Pressure

From Bloomberg

Citigroup Inc., the bank that's lost more than any other in the collapse of the mortgage market, fell in New York trading after predicting ``substantial'' additional writedowns and more losses on consumer loans.

The company, whose value has dropped by a third this year, declined 4 percent on the New York Stock Exchange after Chief Financial Officer Gary Crittenden made the forecast in a conference call with investors.

Citigroup has booked more than $42 billion of credit losses and writedowns since last year because of the credit market contraction, or about 10 percent of the $396 billion racked up by banks worldwide. Vikram Pandit, who took over as chief executive officer in December, has raised $44 billion in capital and outlined plans for the company to reduce assets by $400 billion over the next two to three years.

``We will continue to have substantial additional marks on our subprime exposure this quarter,'' Crittenden said on the call, which was sponsored by Deutsche Bank AG. ``We may continue to see the magnitude of the marks decline, as the exposures that we have have declined.''

Consider this in light of this news from yesterday:

U.S. stocks fell on Tuesday as Goldman Sachs warned that banks may need to raise an additional $65 billion, stoking worries about further fallout from the mortgage crisis.

Goldman said the global credit crisis will not peak until 2009 and lowered its price targets for 14 banking companies. It also cut 2008 earnings-per-share forecasts for 11 banks.

The bottom line is we're nowhere near the end of the problems in the financial sector. Anyone who tells you otherwise is lyning through their teeth.

Let's look at the XLF chart to see what it says

On the yearly chart, notice the following:

-- Prices are below the 200 day SMA

-- Prices have been dropping for the better part of the year, continually making lower lows and lower highs.

On the three month, SMA chart, notice the following:

-- All the SMAs are moving lower

-- The shorter SMAs are below the longer SMAs

-- Prices are below all the SMAs

-- Remember that prices are below the 200 day SMA

This is bearish chart, plain and simple.