September 16, 2011 at 9:45 am | | Comments 2

Lasting S&P Rally Without Banks? Not Gaah Duht

The notion of the S&P 500 running higher without the participation of banks reminds me of Dana Carvey’s George Bush impression on SNL… “Not gaah duht.”

The financials make up roughly 14% of the weighting of the S&P 500, but they carry possibly more from a psychological standpoint.  Traders are conditioned to check the fin’s when the Spoos are on the go, and lately, the participation has been downright pathetic.

Considering that the S&P has rallied within its recent trading range, we’ve seen virtually no lift from key financial names (which I’ll review shortly).  With that being the case, an upside exit from the range which actually sticks (no failure) in my opinion is rather unlikely without the participation of at least most of the names below.

Let’s take a closer look at each with some notes on the individual charts, starting with a look at the S&P:

Chart courtesy of TeleChart

Chart courtesy of TeleChart

Chart courtesy of TeleChart

Chart courtesy of TeleChart

Chart courtesy of TeleChart

Chart courtesy of TeleChart

Here’s the deal…Financials need to pull their weight if this range is going to see a lasting resolution to the upside. It might happen without them, but it’s highly unlikely. Don’t take your eyes off the banks if you’re a bull.

Trade Like a Bandit!

Jeff White
Producer of The Bandit Broadcast

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  1. Hi Jeff,

    Good article, important to keep things in perspective as we get a few sunny days. The temptation is there to go out and get in some multi-day long positions, but until all the indexes finally beat the July highs we cannot be positive of the market direction.

    Have to say that I think that the banks were saved kept them from learning any leasons from 2008. Instead they have continued monkey business as usual getting deeply involved in Greek Bonds.

    According to MarketWatch, U. S. Banks have risk exposure of 41 Billion dollars to Greece.

    ZeroHedge posits that September 20th may be default day for Greece:

    “Two big bonds, the 4.5% of 2037 and the 4.6% of 2040 both have coupon payments due that day, totalling 769 Million Euro. So if the IMF wanted to avoid letting another billion euro go down the drain, September 20th would be a good day to do it. The IMF seems to have delayed approving another tranche for now, so Greece must already have the money for this payment?

    The Fed Scheduled their meeting for 2 days. It now starts on September 20th. Maybe a co-incidence, but what better way to be prepared for new emergency policies?”

    The triangle that has been forming on GLD also looks like it is about ready for resolution about then.

    I think people will do well to remember your mantra of capital preservation.


  2. Hey John!

    Thanks for your comments here, much appreciated. I saw another article the other day from Zerohedge (sent to me by another subscriber) called “Forget Operation Twist” with some interesting claims for what Bernanke will do this week – also cited the 2-day meeting as a reason. We shall see.

    Regarding Greece, just seems if they were going to let it fail they’ve had multiple opportunities to do so before now and have intervened each time. I know there are other factors, known and unknown, so all we can do is watch and respond to the situation accordingly. Our banks are definitely looking sick though, no doubt about it.

    GLD wedge is still in effect. I can’t shake the fact it remains in an uptrend and this pullback has been orderly and relatively shallow, so we could see more strength there if the trend line gets cleared.

    Thanks again for your comments, enjoy your weekend!

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