The big rally on Friday took the Dow and the NASDAQ 100 over their February highs, but the S&P 500 did not confirm the breakout. While the financials, the S&P’s largest sector, were up big for the day, they are not showing much sign of breaking out themselves.
Just take a look at the chart of the BKX banking index. The downtrend is still intact. Now look at the chart of the XLF and note the drop-off in volume. The recent rebound is not generating much interest among buyers.
Now take a look at this Wall Street Journal article published today: Financial CEOs See Recession on the Way. In case you can’t see the article, the CEOs expect GDP growth of 0.92% for all of 2008.
So, now we can see why the financials are acting lame: the people in the best position to know have a very negative outlook.
While the market is trying to rally on a short-and-shallow recession theme, it might time to consider a new theme: “Shallow, but Long.”
[...] days after I questioned whether or not the S&P 500 could break-out without the participation of the financial sector, [...]