Earlier today, one of our visitors asked for my thoughts on the XLF:
Some of my trading decisions are based on the “Double Crossover”. I assume your familiar with it but its when the 20SMA crosses over the 5EMA. XLF has just crossed which seems like it may be time to buy SKF. What do you think?
I don’t think buyers are ready to accumulate financials yet because of continued uncertainty in the credit markets. The recent action in Goldman Sachs is bearish for the financial sector as a whole. When the crisis ends, Lehman probably won’t make it, and Merrill and Citi will be a shadow of their former selves. A dividend cut at Bank of America and other banks are also very possible. The past 2 bounce days in XLF have been on very light volume. I expect the XLF to trend lower or sideways, but I’m staying on the sidelines. XLF has resistance at 22.50, so if you short, keep a stop just above that level.
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August 18th, 2008 at 12:35 pm
Hey Craig,
I like the site upgrade and your articulation of the tech side to all this madness. However, I cannot put aside the fundamental issues that plague the financial sector. There are so many shoes to drop, but I am open to a technical viewpoint, especially considering all the money on the sidelines thus creating volatility. What do you think about the SKF opposed to trying to pick individuals like LEH or FNM to short. When I say short I actually am refering to buying long put contracts. Any thoughts on this is great. Thanks
Martin
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August 18th, 2008 at 12:54 pm
I agree that there are many shoes left to drop in the financial sector. I think SKF is a great way to play a fall in the group. I prefer using broad ETFs as opposed to individual stocks. The overall sector is easier to perform technical analysis on than individual stocks. Good luck trading!
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