Wednesday, 11 March 2009

Financial Sector - the worst could be over

Regular readers of my Daily Form commentary will recall that I have, on several occasions this year both in that column and also on guests slots on CNBC Europe, pointed to the fact that, despite the poor price performance there was a strong case building that the financial sector, and specifically the banking sector, had seen their momentum bottom. The technical conditions for the sector reveals that the real fear based selling took place last October/November and that subsequent new price lows took place with declining fear and momentum on the downside.

Positive MACD/Price divergences can persist for some time before a sector or index will exhibit the kind of powerful price recovery which was witnessed yesterday. However, when seen in the larger context of the chronic price deterioration seen in the XLF sector fund chart, the financials have plenty of ground to make up even before the descending trend line pattern is broken.

The presumption must still be that, while the worst of the selling may be over, the recovery should not be expected to be turbo charged.

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