In July, exchange traded funds (ETFs) within the financial sector have demonstrated how a slight transition from really bad to just a little bad bad can still generate some profit and clean up.

July was also interesting as the Federal Reserve made huge efforts toward saving the banking industry by rescuing Fannie Mae and Freddie Mac, along with legislation to ease the credit crunch inspired by the subprime meltdown, reports Richard Widows for TheStreet. Some, if little, confidence was restored within the financial sector.

July’s top-performing financial ETF was HOLDRs Regional Bank (RKH), which gained 16.7% for July, but is down 17.2% year-to-date. KBW Bank ETF (KBE) was up 13.8% for July, yet remains 23.40% off for the year-to-date.

It all goes to show that one should consider carefully before believing a good month is a solid turnaround. Instead, we think it’s wisest to get in only when they cross the 200 day-moving-average. Financials will be in a position to perform once the turnaround begins, so sit tight.

Listen in as Tom Lydon discusses the economy on Fox Business.

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