Financial Sector Has 7 of 10 Best Days In 2008

With the sector down over 25% so far this year, it's hard to believe that the Financial sector has had most of its best one-day performances since 1990 during 2008.  But as shown in the chart below, seven of the ten best days for the sector (red dots) have come during 2008.

If this story sounds familiar, it's because we experienced a similar situation eight years ago with the Tech sector.  As shown below, the Technology sector had nine of its ten best one-day gains during the bear market of 2000-2002.  There's a reason they say big days come in bad markets.  When the dust settled in tech stocks, they had lost 82% of their value over a stretch of 132 weeks.  This makes the current decline of 42% over a 75-week period for Financial stocks seem downright tame. Does that mean the Financials have further to fall?  While they may go lower, given the fact that the rally in Financials was more subdued than what we saw in tech stocks, the final declines in the Financial sector are likewise not likely to be as severe. 

             

Comments

[debtacid]

Can you say Short Squeeze? The old media never mentions that spikes up may only reflect a short squeeze or a suckers rally or a pump and dump or churn and burn...

2008 Jul 31 07:03 PM

[Max Rapaport]

Now the only question left is when to time the next dip. The fundamental crisis is far from over, and I will be very closely watching what happens with SKF (double inverse financials) as I think that it is at least as important as XLF!

2008 Aug 01 02:50 AM