When bankers are suffering, they shut off the money spigot transmission effect (via the so-called "federal" "reserve") to the rest of us out here in the real world. Don't believe me? Try looking for a home loan right now in the U.S. with zero money down. Though this was standard loan policy 5 years ago, good luck trying to find it now.
The take-home message for traders and investors is that you need to pay attention when financial firms are not doing well. The lag time between a top in the financial sector and the general stock market indices is variable. Here's a look over the past 7 years, the following chart showing the financial sector, using the Dow Jones US Financials Index ($DJUSFN, the green area plot) as a proxy, versus the S&P 500 Index ($SPX, black linear plot):
![](http://2.bp.blogspot.com/-yPUw-NpoKYM/Thkcn5JnQAI/AAAAAAAAClM/nllmPqVKl_w/s400/DJUSFN%2Bvs%2BSPX%2B7%2Byear%2Bdaily%2Bchart%2Bthru%2B7-8-11.png)
I would like to show a few specific, really stinky looking short-term charts in the financial sector, which should worry longer-term equity bulls significantly. First up, Morgan Stanley (ticker: MS) over the past 6 months:
![](http://1.bp.blogspot.com/-aZd2xkBJWqc/ThkdvuJf95I/AAAAAAAAClU/QMl-QFxcZhQ/s400/MS%2B6%2Bmonth%2Bdaily%2Bchart%2Bthru%2B7-8-11.png)
And here's Bank of America (ticker: BAC) over the same time frame:
![](http://4.bp.blogspot.com/-nk3TGB92eo8/ThkeFwvNGkI/AAAAAAAAClc/vxIwqiFwuOI/s400/BAC%2B6%2Bmonth%2Bdaily%2Bchart%2Bthru%2B7-8-11.png)
Remember that AIG insurance firm? In case you forgot, despite their utter insolvency and previous implosion, they are still an ongoing corporation trading in the free markets:
![](http://2.bp.blogspot.com/-womtn5Wo4SE/Thkeb7WrH1I/AAAAAAAAClk/poPfNpumzjA/s400/AIG%2B6%2Bmonth%2Bdaily%2Bchart%2Bthru%2B7-8-11.png)
Next up, Goldman Sachs (ticker: GS):
![](http://2.bp.blogspot.com/-8fHOQ-tXpTw/ThkeqkfUk6I/AAAAAAAACls/8CfAr7IRJJk/s400/GS%2B6%2Bmonth%2Bdaily%2Bchart%2Bthru%2B7-8-11.png)
Finally, one of the biggest financial fish left swimming, JP Morgan (ticker: JPM):
![](http://2.bp.blogspot.com/-ucDjlzisOc8/Thke8V5F3ZI/AAAAAAAACl0/KYt5elJzQsw/s400/JPM%2B6%2Bmonth%2Bdaily%2Bchart%2Bthru%2B7-8-11.png)
I own no financial firm stocks and haven't for years. I do own physical Gold, which helps me to sleep well at night. My bearish tendencies are in hibernation right now, but they are keenly aware of a pending spring awakening. I am patient, knowing that the Dow to Gold ratio will decline to 2 (and we may well go below 1 this cycle). This means that as a Gold investor, I will gain in relative wealth (regardless of any shorting activity) compared to the paperbugs that dominate the financial landscape in the United States.