The financial sector and the exchange traded funds (ETFs) that follow it have seen the ugliest of times as of late. First it was the subprime mortgage crisis, then the credit crunch, and the latest is the bad news frenzy with Citigroup (C), Morgan Stanley (MS) and Washington Mutual (WM). Chuck Jaffe for Seattle Times says you can take this information as a danger sign of what’s to come, while others see it as an opportunity.

ETFs such as Financial Select SPDR (XLF),  iShares Dow Jones U.S. Financial Services Index (IYG) or the iShares Dow Jones U.S. Financial Sector Index (IYF) are not enjoying the best of runs to say the least. XLF is down 17.6% year-to-date, while IYG and IYF are down 18.3% and 15.4% respectively.

Maybe riding out the storm of finance-oriented ETFs will be rewarded with patience. The main problem is that bargain-hunting investors are jumping in before conditions have hit bottom.  Every day the problems seem to change, so the outlook isn’t so clear.  With today’s rebound in financial stocks, could the bargain hunters be out and about?

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.