The market is going from mildly oversold to very oversold as the major indices continue to move south. We are not quite at the levels we saw in March (with the average stock 28% oversold) and January (average stock 46 % oversold).  As of now, the average stock is 22% oversold per the trading bands. But what about the financials.....brokers, banks and finance companies? Are there any concrete technical signs of a change in trend yet? The short answer is no.....let's take a look at Lehman Brothers (NYSE: LEH)

 

 

The bearish resistance line (highlighted in double red on the chart) is like a brick wall that the stock has to bust through to convincingly be in an uptrend. In February, LEH made an attempt to penetrate that at around $66, then again in May at $50. Numerous additional times it was turned aside, resulting in a series of downdrafts.

Currently, the stock resides quite a ways from the bearish line. It will first need to generate a higher top and thus the first buy signal off the bottom to even get the most aggressive bottom-fisher's attention, which would occur at $29. Even then, it would still need to overcome sellers in the $34 and $38 range just to get to the bearish line. After all, that struggle in might even be met with resistance...... again......right at the door step.

My conclusion? It is too early to buy the financials.....let the charts develop and the trends turn positive before initiating.

 

Be sure to tune into Bruce's weekly podcast The Chart Whisperer, with new episodes available every Friday.