The depressed financial sector has investors champing at the bit to get back into those exchange traded funds (ETFs). The sector is ripe for temptation: after all, once it does turn around, it could help investors reap some nice rewards.
Michael Krause for Seeking Alpha points out that investors can’t rely on earnings predictions, since they can often be unreliable. Instead, the results show that while the financial sector is bleeding, there have been some profits, which implies the worst is behind us.
Estimates for the full year are still declining, and earnings are predicted to remain down for some time. But if the forecasts are correct, the sector is on pace to start posting steadily higher quarterly earnings in later quarters.
Is it safe to get back in? We think investors need to stick to the plan: don’t get in until the trend line is crossed (200-day moving average). Some of these funds have quite a ways to go before that happens.
- Regional Bank HOLDRs (RKH), 8.8% below trend line
- Financial Select Sector SPDR (XLF), 10.8% below trend line
- iShares Dow Jones US Broker-Dealers (IAI), 9.7% below trend line
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.