Sunday, July 13, 2008

XLF Update

Here's the 3 linear regression study(30,11,3) of the XLF daily, weekly and monthly bars to help you appreciate the critical nature of the financial sector.
While the XLF continues to ride the lower LR30 daily channel down, the weekly bars have now retraced to the lower LR30 (support) channel per the Jan and mid March lows. From a purely technical standpoint we should expect the XLF to bounce back to at least the channel mean at 20.67, hence my comment on Friday that XLF was a BUY at 18.35, which was the lower channel line.
That being said, my own money on the XLFs is strictly in daytrades as the danger here is the the XLFs will "kiss the channel goodbye" and plummet to new uncharted depths. Although I don't consider this scenario very probable (I think the worst case is a continued slide along the descending lower LR30 channel), I don't want to be holding XLF overnight and get caught in a nasty gap down day of a couple hundred points with the XLF leading the way if we get a few more IndyMacs.
Next week should really add some volatility to the mix as earnings ramp up including Schwab, USB, INTC on Tuesday, WFC and EBAY on Wed, BK, F, JPM, PNC, COF, MER and MSFT on Thursday and C and SLB on Friday.
In case you're still not sweating bullets about the financials, run over to Traderfeed and check out Dr. Brett's sobering post today.

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