Financials Lagging — Again
By Michael Panzner - December 16th, 2009, 6:00AM
After outperforming the S&P 500 index for seven months, the financials have recently lost ground. Since mid-October, the sector has underperformed the broad market by more than 10%.
Based on recent history, that divergence could be (another) sign of trouble ahead for the overall market. Perhaps that’s one reason why firms like Wells Fargo and Citigroup have just announced major cash calls?
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December 15th, 2009 at 2:17 pm
With tens of billions in recaps of gov’t TARP money going through in the next few days, this is potential signal of a bottom in XLF.
December 15th, 2009 at 2:53 pm
The divergence probably is a sign of trouble for the SPX. But the question is “when”; the divergence could potentially last for another couple of months.
December 15th, 2009 at 3:03 pm
Based on this chart it looks like a consolidation ahead of Jan. earnings. Mr Market is getting the longs to bail and the bears to get short before the next leg up. If the banks cannot blow out their Q4 numbers with the current ZIRP then something is wrong.
http://stockcharts.com/h-sc/ui?s=xlf&p=M&yr=20&mn=0&dy=0&id=p01212531221
December 16th, 2009 at 6:48 am
Oh, something’s wrong for sure. Actually, a whole lot is wrong and it looks like its going to stay that way. i give us about a 20% chance of avoiding extinction in the next hundred years. Short-sighted humanity hasn’t learned, won’t listen, and continues using up the finite resources and poisoning its own fishbowl at ever-increasing rates. Good luck with that strategy. The financial end of things will only mirror this and contribute to the overall problems.
December 16th, 2009 at 7:47 am
While the major market averages started off yesterday’s session with a sell-off, buyers were quick to step in and the resulting rally served to recoup the bulk of the early loss. However, the buying ran out of steam up against Supply defined by the highs of the month+ long trading range in the DJIA and S&P 500 and the subsequent decline drove those Indexes to new lows for the day. The NASDAQ, while managing to pop its head above its current rally highs during the morning advance, also succumbed to increased selling and fell to new intraday lows heading into the close. The losses on the day were relatively modest, with each of the major averages falling roughly half a percentage point. In addition, the selling was not particularly intense, as Down Volume was 68% of total Up/Down Volume on the NYSE and 64% of the total on the NASDAQ. Thus, it does not yet appear, at this juncture anyway, that the market is gearing up for a sharp move lower. Nonetheless, yesterday’s apparent failure up against Supply clearly illustrates the sluggish investor Demand that has plagued this market over the past several weeks. This slack Demand keeps the market exceptionally vulnerable to any sudden meaningful increase in Supply.
December 16th, 2009 at 8:41 am
Whalen:”They are rolling the dice bigtime”.So what happens after the TBTF banks repay TARP and then need more capital to cover losses on morts, comm loans and credit cards? Treasury has already declared that they will never permit any of the Immortal 19 to fail!
2009:Repay TARP, pay big bonuses
2010: Emergency weekend meetings with Geithner followed by a new round of bailouts from Geither due to “unforseeably large loan losses” due to lingering high unemployment…?
http://www.washingtonpost.com/wp-dyn/content/article/2009/12/15/AR2009121504534.html
December 16th, 2009 at 10:18 am
Meanwhile, equities are getting pretty seriously overvalued:
http://raphaelkahan.blogspot.com/2009/12/december-stock-market-update.html