'Twas No Bottom for Bank Stocks

Alan Farley TheStreet.com September 22, 2010

Analysts wasted no time calling the bottom when bank stocks lifted off deep lows about three weeks ago, but unfortunately I believe those bullish predictions are premature. The sector's biggest players, as well as the smallest regionals, will likely face months of uncertainty before resuming the upward path traveled after the bear market ended in early 2009.

In addition, we have a Federal Reserve that's committed to an easy money policy for the foreseeable future. That means there will be no interest rate hikes for the next six to nine months, at a minimum, which will in turn deny bankers the obvious perks that come with charging customers higher prices for loans and everything else that revolves around the credit mechanism. So why are Wall Street's talking heads telling Main Street investors to load up on the banking sector right now? My answer is cynical and to the point: What else do you expect? These folks earn their daily bread at the heart of the banking system, and it's a matter of self-survival to foster the illusion of a dramatic sector recovery. KBW Bank Index (BKX) -- Daily Source: eSignal The KBW Bank Index (BKX) slid from an all-time high at 121 in 2007 to a bear-market low at 17.75. The subsequent recovery unfolded in three waves, with the final rally burst having topped out at 59 in April of this year. The index then ground lower in a steady decline that dropped into a seesaw pattern in May. Sharp price swings have kept short sellers off-balance since that time, all the while raising bullish hopes each time an intermediate low has been pounded out and the index has started to move higher. This is a perfect environment for swing traders -- buying support and selling resistance -- but a terrible one for return-conscious investors looking for steady and secure gains. Add Comment Tweet 1 2 3 Last » Next › var OutbrainPermaLink='http://www.thestreet.com/story/10868142/twas-no-bottom-for-bank-stocks.html'; var OB_Template = "thestreetcom"; var OB_demoMode = false; var OBITm = "1276003897985"; var OB_langJS ='http://widgets.outbrain.com/lang_en.js'; if ( typeof(OB_Script)!='undefined' ) OutbrainStart(); else { var OB_Script = true; var str = ''; document.write(str); } adsonar_placementId=1341527;adsonar_pid=879768;adsonar_ps=-1;adsonar_zw=600;adsonar_zh=280;adsonar_jv='ads.adsonar.com'; Featured Photo Galleries var galljs = document.createElement('script'); galljs.src = 'http://js.thestreet-static.com/files/tsc/v2008/js/_1284585420600/min/pages/gallery.js'; var head = document.getElementsByTagName('head')[0]; head.appendChild(galljs); Go to Slideshow Archive Business News From The Web Microsoft Boosts Dividend, Gets Debt-Sale Approval BusinessWeek Online Buffett to Visit BYD in China Amid Declining Sales, Disputes BusinessWeek Online MBA: Mortgage Purchase Activity declines slightly Calculated Risk On the GMAC Foreclosure Stories Calculated Risk RIM Readies Its Answer to iPad The Wall Street Journal. Default Rate Nears '08 Level The Wall Street Journal. Oracle Growth Plans Worry Rivals and Customers New York Times Coda to accept deposits for electric sedan Los Angeles Times A.I.G. Nears Sale of 2 Units to Prudential Financial New York Times Setbacks threaten Delhi Games BBC More Headlines TheStreet Premium Services Compare All Services Jim Cramer's Action Alerts PLUS: Now any level of investor can trade right alongside a Wall Street pro — and enjoy 24/7 access to his portfolio! Learn More Login RealMoney Silver: Get Doug Kass's exclusive trading diary + 5 of TheStreet's top premium services including Action Alerts PLUS and RealMoney — all on one streamlined page. Learn More Login Stocks Under $10: Break into the market with small- and mid-cap stocks... all $10 or less! David Peltier tells you exactly which low-priced stocks he's buying and selling. Learn More Login OptionsProfits: Get 50+ trade ideas a week from the industry's top options experts. Plus — exclusive commentary on market trends and essential trading tools. Learn More Login Breakout Stocks: Find tomorrow's household names today. Bryan Ashenberg finds hidden gems in exciting up-and-coming markets that he believes are ready to break out! Learn More Login RealMoney Portfolio PLUS ETF Action Daily Swing Trade Market Movers ETF Shark Alerts TheStreet Ratings Top Gun Trader Top Stocks try { function DM_onSegsAvailable(segs, cust_id) { for(var i=0;i //* Global Functions *// function metadataRegisterNS(ns){ var nsParts = ns.split("."); var root = window; for(var i=0; i Dow Jones S&P 500 NASDAQ 10-Year Note 10,736.78 1,133.27 2,328.87 25.14 Oil * 77.80 DOWN 24.25 DOWN 6.51 DOWN 20.48 DOWN 0.80 10 Yr 2.51% SPDR Gold 126.08 -0.23% -0.57% -0.87% -3.08% Data delayed 20 minutes Latest Trade Alerts See all function renderFeedContent(data){ for(var i=0; i < 2; i++){ document.write('' + data[i].headline +''); document.write('' + data[i].productName+' ($) - ' + data[i].publishDate + ''); document.write('

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