Profit Taking In Financials

Financials led the way down today as some investors took profit, resulting in the Dow losing 180.51 points. The good news is, the sell off has fairly light volume and is very concentrated in the financial sector, which means that it is no indication of broadbased pessimism in the market. Indeed, the drop today did nothing to change the strong short term bull trend and as we have seen so many times recently, one day drops usually pave the way for an explosive breakout. Will it happen this time round? Chances are good but, being the stock market, one should never completely erase the possiblity of a breakdown at such critical junctures. Tomorrow's Housing Starts and PPI (see economic calendar) would be the focus as investors look for evidences of a recovering housing sector and indications that future CPI is going to ease off. Indeed, the past few months have seen a huge rush to buying properties in the USA from Middle Eastern and Chinese investors (particularly from Shanghai). Such recognition of value is the catalyst needed to end any kind of capital crisis.