I feel sorry for all the fundamental geniuses out there analyzing the financial sector. The IYF, IShares IYF with J.P. Morgan, Bank of America, and Wells Fargo as the biggest holding represent the financial sector.
The financial sector is a non trending, oscillator type of asset class. More often than not, the financial sector just goes up for a few days on good news or analyst upgrades followed by declines on extreme pessimism or analyst downgrades.
The distrust and cynicism that I have is enormous. The change in the first quarter of 2009 in “mark to market” to what I call “market to make believe” can leave the most prudent fundamental analyst scratching his head. If Federal Reserve chairman Ben Bernanke does not know what toxic assets are being held by the banks, how would a trader make decisions?
One of the systematic trading plans we follow at Seleznov Capital Advisors for asset classes that trade with a “reversion to the mean” style or oscillator style is our 3-3 Oscillator Plan. Some traders call this Swing trading.
From the chart above, you can see that a “Buy and Hold investor in the IYF, ETF would have lost money over the past 9 years. By following a systematic trading plan with specific entry and exit rules, a trader in the IYF could have done very well. The top graph shows the equity line for all the trades, and the bottom part of the chart is the price graph of the IYF.
If your firm would like to find out more about technical analysis research from Seleznov Capital Advisors, contact mark@seleznovcapitaladvisors.com
