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The Week Ahead; Will Financials Be Leading This Market Lower?

|Includes: BAC, DIA, GS, IWM, JPM, MS, QQQ, SPY, Wells Fargo & Co. (WFC), XLF

   Last week financials underperformed the market greatly with stocks such as WFC and BAC breaking June lows with conviction. Will this continue into next week? At this point it seems as that we will. 

   Last week we had some very poor numbers in the jobless claims report; 500k to be exact. We all know that these job cuts all came from the financial companies back in 2008, so it was expected financials would have fallen faster. However looking at some of the bank's charts, they seem structurally, technically broken. For example the XLF is only 50 cents away from breaking the June stock market lows, which could cause financials to enter the elevator shaft they created the way up (an elevator shaft is an area of extreme vertical conviction up or down. Usually when the market enters an elevator shaft, it falls as fast as it went up or faster, and vice versa).

   Currently the weakest financials on the radar are WFC, BAC, and AIG, with AIG losing almost 20% in the last 11 days.

  Here are the charts of XLF, WFC, JPM, and BAC vs. the SPY (black line):

As you can see each stock/ETF is under-performing the market quite greatly. The question is will this continue into next week, and drag the market down to new lows potentially? If so I would be a seller of financials as opposed to anything else.

Disclosure: Not Short Yet