Monday, June 2, 2008

XLF

back in April I promised to assess "whether the 'real' economy can endure the crisis in the financial world." then I never got around to it. but with today's events it seems like as good a time as any to take a quick look at the Financial sector.


I suppose you already heard that Standard & Poors downgraded a few of the more prominent names on Wall Street this morning. more than anything, I'm surprised that the stock market didn't fall more than it did today. while the decline was pretty broadly based, the major indexes only closed down about one percent. plus the volume on the indexes was actually below average. moreover the volume on the main financial ETF (XLF) was below average! take a lookie:




now certainly the bearish aspect of this chart is that the price broke below the established support level (which had been about a .618 retracement of the up-move, by the way). but then consider that the price recovered to close back above the briefly breached support. also I noticed, and while it doen't necessarily mean anything it seems at least worth pointing out, that on the equivolume chart, today marked a distance from the previous low in March precisely equal to the distance between the January low and the March low, which means that the amount of volume traded between March and today was equal to the amount traded between January and March. the vertical blue lines on the chart demonstrate this. (the green vertical lines are the equidistant intervals between tops.)




who Knows, maybe the downside momentum will start picking up and the financial industry will collapse. frankly that is, to me, a more aesthetically pleasing scenario than seeing it stabilise. but unfortunately the price and volume data aren't yet flashing such signals.


UPDATE 6/04: well, the downside volume has certainly picked up some the last couple days:




perhaps the Company Store's new-found vigilance isn't such a welcome change as far as bankers are concerned...