Collapse of the Financial

The short term bounce I anticipated did happen, but only lasted 2 days. Since then, the banking stocks just continue their collapses and dragged global markets down simultaneously. Most notable casualties are RBS, BofA and to a lesser extent HSBC.

The weakness in financial is definitely a concern since market trough is often coincided with the bottoming of financial stocks. While bank bailouts continue and are getting larger and larger everywhere, the key issues now are (i) whether losses are contained (think Merrill and RBS), and (ii) whether captial raising is required and if so, how dilutive (think HSBC and RBS). Both issues are interlinked and tied to the worsening economic outlook. In the US, loan provisions are being revised upward across the board (see JPMorgan's latest financial announcement).

Technically speaking, the market is short term (in terms of days) oversold, but intermediate term (weeks) overbought and due for correction (which is happening). I guess buying in a downtrend is a risky proposition and should only leave for professionals. We should see how things pan out in the next few weeks.