By now, you’ve certainly seen that the KBW Bank Index fell 20% yesterday. That’s a crash in one day. If you like a market that takes care of business in a hurry, this one’s for you.
Amid the calls that such a dump on Inauguration Day means that fledgling President Obama is not up to the task, let’s look at technical measurements that might provide something useful to help you make a decision, and possibly some money.
Using UYG as a proxy for the financial sector, we find that the last time we saw a drop this hard this fast was the November low. In the two trading sessions of Nov. 19 and 20, it dropped 22% to $3.74 and an RSI of 28. In the following five sessions, it gained 68%.
Fast forward to now. In the last two sessions, UYG has dropped 31% to $2.73 and an RSI of 26. Since Jan. 6, it’s down 55%.
That drop and that RSI show oversold and ready to bounce, just as they did on Nov. 20. What’s more, the contrary indicator shows overbought and ready to crash, just as it did on Nov. 20. SKF, the -2x Financials ProShare, topped out on Nov. 20 at $262 and an RSI of 74 after running up 137% in 12 sessions. Yesterday, it closed at $199 and an RSI of 74 after running up 96% in 9 sessions.
Interesting, to say the least.
Regardless of whether you think Obama is the man to fix the economy, you probably see the inherent strength of a president in town for a while instead of a lame duck packing his bags.
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