"As the crisis in the European financial sector deepens, trading patterns are indicating a major sell-off within the next month, if the market breaks out of the consolidation pattern forming in the MSCI European Financials Index. After all, the ECB’s extension of its liquidity safety net for vulnerable euro zone banks – and the guarantees for troubled banks in Ireland – can only fuel suspicion about skeletons in the closet.
It's the growing realization that the weakest banks may only have been saved temporarily, by taking on even more risk, that’s leading investors to conclude that the European financial system may be even more unstable than it was at the start of the credit crunch. And now the news flow - and rumors of a bank in trouble - are coinciding with the formation of a big technical 'flag' pattern for the sector that points to a sharp sell-off. As can be seen in the chart ishares' Spanish ETF is tracking the financials sector - given that 45% of it is invested in banks..."
No comments:
Post a Comment