Window dressing is a quarter end phenomenom which benefits winners and hurts losers. Investment managers are usually under the 60/40 rule not the wash trade rule which governs small investors. Despite efforts to level the playing field, institutions drive stock prices, not individual investors.
My point is that I think the movements in banking stocks aren't the result of quarter end window dressing, but symptomatic of underlying weakness in core business lines and exposure to European sovereign debt.
In the interest of transparency, my limit sell on my most recent acquisition of SKF is 90. That price represents a 50% premium from my purchase price and I expect to hit it within 6 months. Normally I would think making 50% on a position in 1/2 a year was insane, but that's how pessimistic I am on major financials.
The risk is that US economic data will be bullish in the short term. Even though I'm more exposured to European issues, I don't think we'll see upside surprises from the European continent. I think the odds are in favor of negative news from Europe but that can be negated by positive news from US consumer spending. I'm bearish on US holiday sales but analysts are expectations are low so even a modest uptick could trigger a short covering rally.
And even though I'm not making bets on retailing, financials are highly dependent on consumer sentiment and perception of the stength of the US economy. Consequently, my biggest threat is bullish US retail data, not bullish European data.
Like I said, my sell target is 90 on SKF. I may modify it based on market conditions, but I absolutely hate financials right now.
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