Stocks in the U.S. soared on Wednesday, led by the financial sector after the Obama administration said it's considering setting up an aggregator bank, or "bad bank," that would buy up all the toxic assets that are wrecking the balance sheets of banks.
Many investors were surprised to see the market react so positively to the proposed bad-bank plan, because the Obama administration didn't release any details about the types of bad assets it will accept or how it plans to treat the banks after it takes the bad paper of their books.
Some were even more surprised to see the market take up the financial sector when you consider that in 1980 we saw a similar plan during the S&L bailout crisis, but the financial stocks were met with big selling in the years that followed.
Is the stock market ignoring history? Will the bad-bank plan actually work, and how will it shape the financial sector for the future? These questions are almost impossible to answer. Investors could spend hours, if not days, trying to figure out how everything will eventually play out.
The truth is that only time will tell, so instead of spending a lot time trying to figure it all out, investors would be better served by spending their precious time looking at the charts, or using technical analysis.
This article will focus on the financial sector since the group was in play on Wednesday. Below are four compelling charts that could be setting up to make a big move.
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