The XLF financial-sector ETF bounced off of its March 17th low last week, but are bulls like Jim Cramer and Doug Kass (who is long Citigroup) justified in their jubilation? Not a chance. To see the no-brainer evidence for my contention, just punch up a chart of the BKX banking index. Not only has the BKX plunged through the March low, but it will soon be testing the fabled October 2002 low (just as I predicted on May 28th.)
XLF will continue to follow the BKX down.
Cramer wrote on Friday:
“In the end, though, despite these dramatic declines…the market didn’t go back to Bear Stearns levels, which says that the bottom we put in with that fiasco is HOLDING STRONG.”
Cramer, who does not believe in technical chart analysis, is ignorant of the fact that the first test of an important support level usually holds. But the support will be tested again, and judging by the increasingly bad news-flow coming out of financial companies, it will...
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