Where are the Financials?

Probably the main reason why the S&P 500 has struggled to take out old highs in recent weeks is the performance of the Financial sector. It's actually surprising that the market is where it is given how poorly the Financials have done. As shown in the first chart below, the S&P 500 Financial sector can't even get above its 50-day moving average, much less test its bull market highs from a month or so ago.

The Financials led us into and out of the bear, and it's hard to imagine the overall market continuing its bullish pace over the next few months without a resurgence in the Financials. The question right now is whether to treat the stagnation as a bullish signal to gain exposure to the sector or a bearish signal to sell the broad market.

click to enlarge

Comments

[The shark]

Historically the Financials lead into and then out of recession. My guess therefore is since they led us into the 2008/2009 down turn - then out from the March 2009 lows - they are now showing the way forward from here so selling the market now would be opportune. Unfortunately, I sold the market in early October! I guess therefore I am looking for every reason why the market should could down - the "leverage factor" may just keep it rolling!

2009 Nov 23 04:42 PM