Financials Back to Oversold

by: Bespoke Investment Group May 23, 2008 | about stocks: IYF / XLF    

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After briefly moving into overbought territory earlier in the month, the S&P 500 Financial sector has moved to the bottom of its trading range once again. The short-term uptrend that formed off the March lows has also been broken, so the sector is now trending sideways until it takes out its recent highs or lows. Breadth has also gotten weak again. On May 1st, 85% of Financial stocks in the S&P 500 were trading above their 50-day moving averages. Currently, just a third of the stocks are above their 50-days.

Hopefully the sector begins to stabilize at current levels and doesn't get back to the extreme oversold levels constantly seen over the past 9 months.

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This article has 7 comments:

  •  
    May 23 09:41 AM
    Why bother with financials right now? I don't think we'll misss the boat on these companies, run by scumbags, they won't raelly come back until after the election results are in. and maybe not even then.

    SKF and SRS are the way to go in the meanwhile,

    I hate banks!

    BDO
    Reply | Link to Comment
  •  
    May 23 10:26 AM
    Hate, blanco-dee? It's not a popularity contest, it's a stock market. We're here to make money.

    I liked SKF at 90 and it was a steal at 80 but at 112 I just shrug. Like you, I'm not too worried about missing the boat. The frustrating thing is that unlike in most sector slumps and steep sell-offs, good companies like USB haven't taken their beatings with the rest. XLF is probably where it should be; it's a garbage barge and many of its components probably won't exist in 10 years. But the financials worth owning are, sadly for the would-be buyer, holding up just fine. This combination of high prices for quality names and extremely high risk in the rest makes the sector very unappealing. The trader in me says XLF is a buy near its lows and in oversold territory, but fundamentally it's probably still 40% too high and catching a falling knife is tricky.
    Reply | Link to Comment
  •  
    May 23 12:17 PM
    I entered the leveraged ETF UYG at the bottom and still have 2/3 position. Plenty of upside from here. The reasons are numerous;

    everydayfinance.blogsp...

    In addition to the large financials, the yields on some of the smaller ones are exceeding 12% now.
    Reply | Link to Comment
  •  
    May 23 05:34 PM
    Panic selling happens only under over sold condition.
    Reply | Link to Comment
  •  
    May 24 10:15 AM
    One example: The mighty C is basically an insolvent institution and will continue to help weigh down any index it is included in. How can any one logically state that the financials are oversold based on chart criteria alone? The financials have BILLIONS and BILLIONS in losses yet to come. Uhhh... it is possible for stocks to reach $0
    Reply | Link to Comment
  •  
    May 24 02:26 PM
    "Financials Back to Oversold"?

    How about: "Reality re-enters market".
    Reply | Link to Comment
  •  
    May 24 02:41 PM
    I think it is wise to buy financial stocks whenever there is a fire sale.
    We should look for best managed financial companies now.
    Reply | Link to Comment
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