It is on my my mind that we’re seeing 2007 all over again in the financial sector stocks.
During the pullback in the SPX since January, housing stocks and the bank stocks have been breaking support and beginning to “stair-step” down (see the chart below), led to the a possible 2008 cellar by DB and now with GS (a bellwether, no less) following suit.
The rest of those I follow – JPM, BAC, WFC, USB – are sitting right on support. It the market takes another hard hit (like tomorrow?), they could all be in solid downtrends.
Needless to say, as the banks and the general market tend to feed on each other in up trends, they can also eat other alive to the downside too.
(click on the chart for a larger view)
Update April 3, 2107:
After eight days down in a row on the Dow, today’s bounce was nearly inevitable. Eight days in a row is a lot when four is most often the magic number to buy for a bounce.
And as inevitable, an oversold sector is likely to bounce with it. In this case, the financials – that is, the banks — GS, leader to the downside, as well as JPM, BAC, and even the deadest dog of the bunch, DB, which has some serious fundamental problems all its own (besides being the last lender to loan to Donald Trump).
Most likely this bounce will continue in a rise to resistance, most likely to bottom of the boxes indicated on the chart below at the point the stocks fell through support going into this recent decline.
If they turn over again with lower highs sometime soon…say, next week…that will not be good for any bull market going forward. In other words, head up the bull might actually be stumbling.
(right click on the chart for a clearer view)