The banks continue to underperform, and GS has moved to a new low this AM. If institutional investors don't have confidence in the financial system and are aggressively selling these shares, it's difficult to imagine sustaining a bull move in stocks. Indeed, short-term traders have done well by playing off relative strength and weakness in the financial sector, as these stocks are capturing the hopes and fears of large market participants.
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Regarding using the Financial stocks as a sentiment gauge (risk-seeking vs. risk avoidance behavior), would you say that it can be looked at much like other sentiment indicators? i.e. when it's bullish, that's a good thing and you look for higher prices and when it's bearish lower prices, but when it gets to extreme readings it becomes a contrarian indicator. So for Financials relative strength, if they're leading it's good, but if they get quite overbought relative to the indices could it mean too much optimism and risk assumption and thus be a potentially bearish signal (and vice versa when they become oversold to the downside and you see indices diverging from them)?
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