Take a look at the following chart.
Now, can you guess (1) what indexes they represent and (2) the time frame that’s shown.
Give up?
The black line is the NASDAQ from the early 80s to its peak on March 10, 2000.
The blue line is the inverse of the Philadelphia KBW Bank Sector Index from August 2005 to March 6, 2009. I basically turned this chart upside down.
I understand that one can often create a chart or look at a chart and have it say whatever he or she wants. With this in mind, I simply want to illustrate how parabolic moves eventually exhaust themselves and reverse sharply. We saw parabolic moves reverse last year with the prices of oil and other commodities. Likewise, I think the extreme downward pressure on the price of bank stocks will ultimately reverse, most likely quite more sharply than people will expect.
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