Saturday, May 09, 2009
Washington smoked out wall street, now they are all stoned. The financial sector ETF, ticker XLF, is up 124% since all time low at $5.82 made in March. Yes, thats a 124% gain for the sector in two months, and it isn't a leveraged ETF!!! We all know about the free money that the feds have been throwing at banks, and we've heard about how well the banks all performed in the "stress" tests. Things have been going so well for the banks that times couldn't be better, yeah? If you bought this rally, congrats, nice trade, way to go. If you got squeezed on this rally, sucks, life's a bitch sometimes. If you are still buying this rally then you must be smoking some really good stuff. Hit and pass man, hit and pass.
The long term picture looks like a textbook correction. The XLF performed a 31.8% (Fibonacci) retrace back up to it's 200 dma. From a technical standpoint this rally has set up a low risk, longer term short entry on the financial sector. It seems pretty clear that the secotor will pullback here, the question is, will it hold the 50 dma and if not, will it make new all time lows. Time will tell.
I could see this spiking up above that 200 dma to form a hammer reversal day, but frankly, I'm happy with these prices. I initiated a put position in XLF last Wednesday then added to it heavy at the close Friday. If it does spike up to $13.70 or so, I'll add one more time but any higher than $14 and I'll stop out.
And in related news:
Banks Successfully Lobbied Fed to Make 'Stress Tests' Less Stressful
Insider selling is at record highs
Big US Banks May Be Headed For Extinction—And Soon
Fannie Mae (taxpayer owned) lost $23B last quarter
WFC and MS rape investors for another $17B by selling stock (lol)
Big bank profits are bogus, a massive public deception