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Tuesday, March 17, 2009

Banks Went Red Starting Friday

The Bank Index (BKX) rallied from an intraday low of $17.75 to an intraday high of $27.65, or 56% in six trading days. Enough is enough. This short covering sprint has left the buyers exhausted and the banks overextended.

The banks closed in the red on Friday, even as the broader S&P 500 (SPX) rallied almost another 5%. The banks then closed red again on Monday, and the SPX fell slightly into the red, giving up 2% intraday.

BKX has gone from oversold to overbought... while failing to take out the previous swing high of $27.99.

The Regional Banking Index (KRX) looks exactly the same. The previous swing high of $40.03 held. KRX also put in two consecutive red days.

The short squeeze has run out of steam...

Expect a quick return into the abyss.