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Financials Set For Another Dead Cat Bounce at Trader’s Narrative





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The financial sector has been beaten to a pulp during this latest bear market. Every time it gets extremely oversold, it manages a feeble bounce only to dive down headfirst once again.

During the past 12 months or so the bullish percent index has jolted from one extreme to the other. According to the bullish percent index for the sector, it looks like we are setting up for one of these bounces:

bullish percent financial sector long term chart Jan 2009

If we zoom into the chart we can see things a little bit better:

financial sector bullish percent 2008 to 2009

And here is a corresponding chart of the Philadelphia Banking Index (BKX):

financial sector BKX chart 2008 to 2009

This bear market has been unusual because the financial sector has been one of the key players. In previous bear markets the banking sector has actually outperformed the general market. But obviously not only have they failed to keep up with the market lately, they have been the reason why it is dropping like a rock.

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