Is the banking crisis truly over?

oldfairy

Posted by Michael Vadon

Recommended by Cobra

Many of the politicians and financial reporters have declared an end to the banking crisis and to the recession.  Warren Buffet declared that he would throw all of his money into Wells Fargo if he could choose one stock.  Such statements and rampant bullishness on a clearly flawed and broken industry made me somewhat suspicious so I took a closer look at the charts.  Honestly, during the bottom in 2002 did anyone come on CNBC to declare it was all over and they were going “all in”?   
Lets take a look at the KBW Regional Banking Index which is composed of 50 different small time banks spread across the United States.   

Components of the KBW Regional Banking Index
This chart is, by far, not what I would call a strong bullish chart.  This is a chart that could easily put in a new low within the next 30-60 days.  The chart no longer appears to be in an uptrend and is in the process of failing its support.  


The KBW large bank index does seem somewhat stronger, however, it too no longer seems to be in an uptrend.

Now what about Wells Fargo?  The bank that Warren states he would go “all in” on if he had to make the decision…

Although still relatively strong, I see that candle slipping off its support at the end and, since May 1st, no longer in an uptrend.

When I first mentioned the FAZ in the past, there were a few readers of the blog that decided to get in right away and they were obliterated on the whipsaw.  As well, I have posted other charts where a few readers went in right away only to get obliterated.

Please keep in mind when I mention a stock or index that I am not telling you the exact entry point, but simply pointing out a technical structure that I feel deserves attention.  Oftentimes, I will sit at my terminal during the trading day for hours on an end waiting for the most ideal price point.  Sometimes the buy point wont actually come for days or weeks (if it does come at all).  It takes a great deal of patience and fortitude in waiting for the ideal buy point on a swing trade.  Personally speaking, I find day trading a lot easier then swing trading because there simply is no waiting to see if your thesis will come true…

Therefore, please regard the following as a structure that I am monitoring and that you should decide yourself on the exact entry point and risk parameters.   

My opinion on the matter is the FAZ is no longer in a downtrend, but is basing and consolidating.  During the last few months, price has always exited out of the bottom of the triangles that were created, but this time it seems to exit out of the top.

For the fundamentalists, I can tell you the FDIC does appear to be having some trouble in insuring the smaller banks.  There is fear in the air that the United States credit rating will be lowered.  PIMCO’s Bill Gross is stating that its not a matter of if, but when.  The government did not prop up the smaller banks only the larger ones.  There are thousands of small banks out there and we have a lot more failures to go.   



How much more debt can the Chinese buy?  Keep in mind the GDP of China is 3.2 Trillion.  The better question is how are we going to pay all this back especially with so many unemployed and the economy shrinking?   My bet right now is the FAZ…

  

jackyking

we shall see...

jackyking

first time sf?

soulvirus

thanks for sharing

ultimate

thanks!

feelucky

faz is not for 青蛙。 better short FAS＠３０％ａｎｄ　short FAS@20% if  believe faz is going up :-)

aurora99

thanks!

Persistance

Thanks for sharing!  If the unemployment rate keeps up, the real hard time is coming and could last long time.

acura

thanks