Monday, September 28, 2009

Financials Are Still Lagging

Today, the U.S. stock market did some acrobat again. Overnight, Asian markets were obliterated (particularly Nikkei) partly because of stronger yen potentially hurting the recovery of Japanese exporters. But the U.S. market jumped on the news of M&A.

In the buoyant market with low volume, one sector seems still stuck in the range, and that's financials.

Here's the weekly 2-year chart of financial (unleveraged) ETF, XLF. From the top of May 2007 (financials topped way before the general market did in October-November 2007) to March 2009 low, it has yet to retrace up to 38.2% from the bottom, at $17.37 or over 15% from the current level ($15.08). The slow stochastics set at (60,3) to see the long-term trend is still below 50. CCI set at 233, again to see the long-term trend, is yet to go above -100.

I am still holding FAS that I bought back in March, when XLF was about $9. For XLF to go higher, it needs to hold the trendline, and at least cross over 89-MA - that's about $16.25. The next target would be the 38.2% retracement at $17.37. Around that area is very thin, so it could run up to the 50% retracement at $20.94 - that's close to 40% increase from here.

Well, that's a stretch. No way in hell it's going to reach that level. Or so it seems. But never say never. If XLF jumps 40%, that means FAS will jump 120% (in reality it would be less, maybe 100%). I wouldn't mind having FAS (I still have them) double from here...

But let me remind you this is just looking at the chart. If you read news, it sounds like this is the last sector you should be touching. So far I've been lucky. The technical levels that I'm watching hasn't been breached, and so far there is no reason to sell out longs (unless they are options, which I have a few).

(Why am I hosting the Kellog Raisin Bran ad? Thanks GoogleAds.)

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