Farley: Wait for Proof of Turnaround

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Amex Securities Broker-Dealer Index (XBD)

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Source: eSignal

The Amex Securities Broker-Dealer Index (XBD) has carved out the same broad strokes as the banking index, but its technical improvement is more obvious to the naked eye. In particular, price is now trading above the lows broken in the first quarter. On the flip side, the index has made no progress at all since July 23, when it topped out at 164.50.

In a nutshell, it's déjà vu all over again. Remember the bottom-calling scramble after the August 2007 selloff? How about the table-pounding after the January decline and March tumble? In each case, a core cadre of talking heads was absolutely certain the final low tick of the financial debacle had been printed, mailed and delivered to an eager public.

In reality, price action since July looks just like the flameouts we saw after those false bottoms. So how can anyone in his right mind assume it will be different this time around? And how can anyone, crazy or otherwise, ask war-weary investors to throw away more money betting that Merrill (MER Quote), Morgan (MS Quote) or Lehman (LEH Quote) have finally turned the corner?