Financial stocks were hit hard (again) today. Big banks and small community bank stocks fell along with just about everything else. Technology shares also came under pressure. Triple witching, "Triple witch" refers to the expiration of equity options, index options and index futures and occurs in March, June, September and December, also played a bit of a roll in todays heavy trading volume.
If we get some follow through selling on Monday and/or Tuesday, I am looking for a bounce. Investor sentiment has continued to deteriorate at a rapid pace. I will be looking to continue moving some funds into the indexes of the S&P Mid-cap 400, S&P Small cap 600, Russell 2000, and potentially the S&P 500, if we experience a steep decline next week. The current yield on the Dow Diamonds (DIA) is 3.3%. Not bad.
Below is a chart of the Banking Index (BKX) dating back to 1992. You can see that the index at the previous lows set in 1997 (when the Asian Flu, worries about a global economic meltdown, and the Venezuelan currency crisis were going on). 2002 which was the bottom of the bear market. Now, the bank index index is back to where it has found support in the past. It has not been easy calling a bottom for bank stocks. Value managers have been burned by buying to early, and the continuing uncertainty surrounding banks has caused investors to flee these stocks in droves (and forcing fund managers to liquidate holdings as a result). The sub-prime mess, worries about future earnings growth, and the safety of dividend yields has also hurt these stocks. I believe that there are some very good opportunities if the risk is spread around, a patient investor will be rewarded.
