Natural Potholes

With the prospect of a much more dovish Fed than had been expected just a few short weeks ago, financials, insurers, and brokerages are all struggling mightily this morning. Typically, when this complex has displayed sharp weakness, as we saw off the open, the broad market takes notice and at least slows down a bit, keeping a lid on even the most impressive of software, tech, or medical device charts. 

The large U.S. banks report earnings within the next two weeks, which could serve as an excuse to either exacerbate this morning's selling or stem the tide.

However, when we take an objective look at a prominent broker like AMTD threatening a decisive bear flag breakdown (daily chart, below) within the context of an ongoing downtrend or correction, it is worth giving bears a nod of respect with the entire financial/insurance/brokerage complex staying weak. We discussed the AMTD setup yesterday for Members in the full-length Weekend Video Strategy Session, and it is interesting to see bears wasting no time to being the shortened week by going after it. 

Beyond that, the three-headed European bank monster of BCS CS DB also remains weak, already relinquishing a chunk of the post-Brexit bounce gains this morning. 

Overall, while the broad market may simply be digesting last week's gains, we have a clear problem spot in the aforementioned complex which should be tracked closely over the summer, facing natural potholes with rates staying low...and possibly going lower with a dovish Fed.