I analyze macroeconomic issues from a fundamental perspective, and I analyze market behavior from a technical perspective. Original macroeconomic analysis can be found here and both macro analysis and commentary can be found on my Caps blog. If you like or appreciate my analysis, please add yourself to my Following List

Sunday, December 20, 2009

Do You Smell Something?

.... Yep, it's Financials. Peee-Yeewwwww!!!

I am very vocally bearish on financials for the long term. I think they are the cancer of the US economy. Monetary policy over the last 20 years have allowed for, encouraged in fact, the economy to become financially top heavy. I could go on a rant (and have many times in the past regarding financials) but I will not. I am very long term bearish, and I will leave it at that for the moment.

Here is my P2 count for financials. I think P2 is done for the sector. There is a possibility that the action the last 2 months was an X wave and now working on Z of P2. If this is the case, then I don't think it will make substantially higher highs. In fact I would expect it to make what amounts to a double top.

But there is a difference in being long term bearish and recognizing the possibility for a near term upside move. And I think there is one. Here are the two basic scenarios that Gumbo and I see (we have been discussing this recently)

- (binve scenario): We are in Minor 2 up of Int 1 of P3. Next wave up is a Minute C of 2.

- (Gumbo scenario): We are in the final wave up of Int Z of P2. It will make a slightly high than Oct high

So the way I am playing this: I am waiting for the move within silly season to run its course and will be establishing a long term short position in XLF probably in early January. This will be a "short it and forget it" type position.

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