The bloom has already started to come of the rose, but even so, at least one firm’s analyst saw fit to say something. Merrill Lynch has warned against the “sell energy, buy financials” trade, as reported in the Times of London:
Merrill said yesterday that the unwinding of the classic bet of the credit crunch may already have been overdone, giving warning that banks across Europe could still be forced to raise between $70 billion (£37 billion) and $120 billion in new equity on top of the $120 billion already raised. Barclays and HBOS looked most vulnerable among UK banks to having to go back to their shareholders for more equity on top of the £4.5 billion and £4 billion, respectively, already raised.
Merrill said that the rush to buy back into banks may already have gone too far after it stress-tested their balance sheets. It also said that fears over the sliding energy price were being overplayed.
If you believe in technical analysis, Ben Bitroff has some charts that he says show that financials are overbought.