Financials: Sector slightly underperforms following a couple technical sell signals (SPX breaks through its 200-day MA, MACD dipped below signal line), the dollar trends higher, and treasuries continue to be strong. Away from these factors, some investors are citing concern over a couple banks that used up $430mm in Fed USD Swap Lines following a month-long quiet period. On this sell-off, volumes are elevated at 30-40% above the 20-day MA. Flows are also very active versus the recent past with both high HF and vanilla participation. Long-onlys remain active two ways in regional banks and better buyers of asset managers on this pullback. HFs also very active in regional banks (two ways, better for sale short) and buyers of life insurers on the groups major pullback. The technical picture accompanied with over the pace of the credit recovery ar driving regional banks lower. Valuation arguments are not being given much credit as doubts continue to exist on when normalized earnings will be achieved. As HFs continue to add to short positions, vanillas are rarely being seen to take in the group at recently discounted prices. Catalyst for the group are minimal as earnings are all but complete, the lion's share of July economic data has been reported and Congress in out of session. Look for global stories and technicals to drive the market going forward.
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