Friday, January 22, 2010

Banking AND Is the time right for Contra ETFs?

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Before I anwer that question, the strongest performing group (according to GGT) from yesterday's plunge was Banks (Multi-Regional), Banks (Midwest), Banks (Northeast), and Banks (West/Swst).  Make sure you're looking in these areas for opportunities, as they are flying under Obama's radar...  To facilitate this, the strongest are (according to GGT):
  • Midwest Bank: ASBC
  • Multi-Regional: FITB
  • Northeast: BPFH
  • Southeast: UCBI
  • West\Swst: COLB

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Here is my HGSI chart of Contra ETFs -- all of them that have 50d MA volume greater than 100k shares:





The chart is interesting for a number of reasons:
  • The Bongo weekly, which is a signal is determined by the value relationships of 3 different Wilder RSI's and a moving average, just moved into a green zone.  This is bullish for contras.
  • The Bongo daily, which moves faster than the Bongo weekly, is already green, which is bullish.
  • Accumulation / Distribution is green, so we have the expectation of prices moving higher.
  • For an index, we want to see the Elder FI(13) in a green zone, which means that (volume * price change) for the index is above 0.  This is the case now, and is bullish.
  • The %B and Bollinger Width is presently green, which indicates overbought.  This is a cautionary flag.
  • Price is poised to break above the 50d EMA for the first time in quite a while.  Take a look at the past -- this has been a point of resistance.  CLOSURE ABOVE the 50d MA would be bullish, failure to close will be another resistance line.
  • Two light-blue Little Kahuna's appear in sequence on the bottom ribbon, which is longer-term bullish.  This does point to the %B rising very quickly and now indicating overbought.
Bottom line:  I still think it too early to enter full positions on Contra ETFs, at least until we cross and close above the 50d MA, but overall, we are very close.  We need to watch these very carefully.