Tuesday, September 11, 2007
long the financials? long real estate?
as abysmal as the picture seems from an economic standpoint, i wonder if there isn't a case to be made here to go long the financials -- just the opposite of my current position.
as seen above, the sector has experienced a brilliant washout -- on a par technically with the deepest bear market lows of the 2001-2003 run. 65% of the component stocks in the iyf got within 5% of their 52-week lows. about 40% actually made new 52-week lows. at bottom, just 6% were above their 150-day moving average. that is destruction!
some bullish non-confirmations are mixing in.
but i'd really rather to see some positive leading divergence in new highs to give a greater sense of refuge here. and maybe that will appear before the financials right the ship.
an even better case can be made for real estate.
i still think that a retest of the august 16 low in the indexes is likely -- perhaps not for leading groups like tech, but for the broader market. many of these etfs (including real estate and tech) reached oversold readings on september 4 that could well have marked the end of a bounce and the start of a test lower.