Tuesday, September 9, 2008

Financial Sector Still In Trouble


Above is the yearly chart of the XLF -- the ETF that tracks the big financial companies. Notice yesterday the market rallied to the long term trend line but backed off. Also note that today the the downward trend is continuing. In other words, so far the Fannie/Freddie nationalization isn't breaking the trend.


On a closer look, notice the following:

-- The shorter term SMAs are bunched together.

-- The 20 and 50 day SMA are horizontal

-- The 10 day SMA is meandering

-- Before the Fannie/Freddie bump, prices and the SMAs were wound pretty tightly together for about a month.

Technically, you could argue the market was at least stabilizing. But with the financials still in the middle of the giant write-down (see Lehman and WAMU today), I'm just not comfortable making that call. There is still way too much possible turmoil out there.