XFN , XLF, RY and other Canadian Banks.

XFN and the XLF are, of course, the Canadian capped financial ETF and the S&P’s counterpart for the US. All but one of the Canadian banks have reported their latest quarter earnings and for banks worldwide, they got a pretty good boost from the coordinated global central bank commitment to ease swap pricing even if it is not clear what will come out of that. In any case  good time to review the banks. To start the XFN and XLF;

XFN dec 4 2011XLF dec 4 2011

The message from these virtually identical charts is that a 5 wave down sequence was complete and some sort of complex a-b- correction has been going on for the past month or two and is not yet complete. Basically both could attempt to get back to the 200 day moving average (the red line) but they certainly do not have to go that far!

How this fits with the Royal is clear from the chart;

ry dec 4 2011

A move to about $50 to $53 seems to be in the cards. As the buy was recommended at about $43.50 one would theoretically be up $5 already. It was not always possible to get a good fill as the stock gapped twice in the last week. Whatever, a 10% gain is in the cards and I would suggest to take it.

The Royal and the others, except BMO that still has to report,  demonstrated their dependence on the nickel and dime business which is little more than an oligopoly rent. Generally, despite new records, particularly in insurance, the old mainstays of proprietary trading and M&A, together with new issuance, were disappointing. Overall the banks are overvalued.