Regional Bankers at Risk

The report from the Office of Management and Budget I refer to below mentions the exposure regional banks have to the GSEs through ownership of mortgage backed securities (MBS). There are two indexes made up of banking stocks. One is the Philadelphia Banking Index (BKX). The other is a HOLDR from Merrill Lynch called the Regional Bank HOLDR (RKH). RKH has the following holdings, which are nearly the same as BKX, hence the simlar performance, charte here against the Philly Gold and Silver Index (XAU) since the beginning of the "reflation rally" in March 2003. AmSouth Bancorporation (ASO) Bank of America (BAC) BB&T (BBT) Fifth Third Bank Corp. (FITB) Comerica Incorporated (CMA) J.P. Morgan Chase (JPM) KeyCorb (KEY) Marshall and Ilsley Corporation (MI) Mellon Financial Corporation (MEL) National City Corporation (NCC) Northern Trust Corporation (NTRS) Piper Jaffray Companies (PJC) PNC Financial Services (PNC) State Street Corp. (STT) Sun Trust Banks Inc. (STI) Synovus Financial Corp. (SNV) U.S. Bancorp (USB) Wachovia Corporation (WB) Wells Fargo & Co. (WFC) A couple of things to note on the chart below. First, volume in RKH exploded in April of last year, about the same time ETFs became very popular as convenient proxies for sector trading. Second, the XAU is down by half from its gain, measured over the last two years. Take a look at the other chart below to see how it looks, technically speaking. Is it time to buy gold calls? Bottom of the channel? Or moving down to the next channel?