Banking Stocks Breaking Down Through Decade Long Support

Since our last update on the banking sector, this market has continued to free fall with no end in sight.  As the markets continue lower, the banks lead them and with the credit problems that continue to put a damper on things for the banks, the worst seems yet to come.  From what we have been reading, only 30 to 40% of the actual write downs have been made by the banks.  The market knows this and is expecting some of the banks to go bankrupt or be taken over at bargain basement prices.  We know the US banking sector is in deep trouble and we know that these stocks will continue to head lower but the show must go on.  We also know that the Fed will not support any more of these collapses.  Take a look at the Fed's repo lending activity.  That should give you a clue that they no longer wish to inject endless supplies of liquidity into the markets.

We are witnessing longer term, multi year and decade support levels being broken and being broken with massive volume.  Not good.  I mentioned a pattern of lower highs and lower lows all the way down from the top.  This is still in tact.  No sign of a bottom as of yet.  Lets take a look at some of the charts to give us clues.

However, with all this being said, we are a couple months away from perhaps the greatest buypoint on some of these banking stocks that we will ever see in our lifetime.  The capitulation we are witnessing here and now will put a bottom in for years and will provide us with an opportunity to steal some of these companies dirt cheap.  The selling in these stocks is still controlled and no divergences to be found.  Once we start seeing those divergences building, we will start to look for fundamentally sound banks and keep a close eye on them, looking for price breakouts.  Stay tuned!