Financial sector is breaking down

As the SPY continues its relentless advance toward the April highs one sector has not, the financial. This is a big red flag as a recovery cannot be sustainable without it.

The market has been rallying due to a weak dollar. Oil companies like Exxon and Haliburton will benefit from a weak dollar because a weaker dollar means higher oil prices which translates to profits for these companies.

But oil companies aren't the only ones to benefit from a weaker currency, IBM and Apple do as well. These 2 major technology companies have a market around the world. And because the dollar continues to weaken, selling to foreign countries become cheaper.

Commercial banks, however, are more America-based companies. They do not have much of a market outside of the United States. Wells Fargo and Bank of America, for example, hold foreign assets but the majority of their business is ran here in the States. And because the banks got us into this mess, you have to expect them to be the ones to get us out of it. If they do not lend, companies will not hire, jobs will not return. But they can't lend because the government requires them to have a certain amount of reserves in case of another panic, and they do not wish to lend in an economy like this. It is increasingly risky for the banks to loan to anybody when companies keep going out of business and homes are taken back by the banks. It's a vicious cycle.

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