I’ve seen quite a few segments on TV where pundits are being asked if it is time to go in and buy financial stocks.

Let’s take a look at XLF, the Financial Select Sector SPDR ETF.

XLF has been underperforming the S&P 500 Index since February 2007. The most recent move down can be viewed as “extended” in that we can expect some smaller bounces accompanied by a contraction in trading range after the initial “waterfall” decline. What comes after that is unclear as this technical pattern is not generally considered a bottom formation.

On a fundamental basis, the impact on future earnings is unclear due to LBO loan exposure and potential non-performing assets elsewhere on the books that currently have no bid. This harkens back to the tech companies in late 2001 when they used the term “no visibility” to characterize earnings estimates for the next quarter.

Conclusion: For traders only.