Crocuses Financials {KBE}

We conclude our "Crocus" Series by taking a look at the financials. This is perhaps the most important chart of all. Banks led us into this disaster and arguably no bull market will have legs unless the financials come along for the ride.

1. Financial firms are just beginning to turn the corner. We see the beginnings of a "Golden Cross" here. This trend is fragile and could turn around or pause {just like the rest of the market right now}. Resistance lies not so far above at around 20.

2. Same trading range as most other indices.

3. Overbought.

One final note on the financials. Much of why stocks have rallied these past 6 weeks has to do with the belief that the worst is over for this sector. In fact the market has been taken heart to better than expected earnings from some high profile firms in this sector last week. However, our recession is not over and for individuals it might still get worse before it gets better. We have to be on guard for the possibility that the banks could see more bad news during the rest of the year. Also some sort of rest or profit taking is likely at some point here as some of these firms have advanced almost 100% {though off of very low bases}. Again for emphasis it is unlikely that stocks can sustain much of any further advance unless the financials come along for the ride. That is why we monitor their progress closely on a day to day basis.

*Long KBE in certain client accounts.