If we have learned one thing since the 2007 top it is that the financial stocks are the most important sector that a trader or investor can follow. When the financial stocks decline it is prudent to expect the major stock indexes to follow right behind them. In 2008, the financial crisis was all about the large banks and in 2011 it is still all about the large banks. This time the banking crisis has emerged from across the pond, the European Union. This problem will not just disappear anytime soon. This crisis is very complex when it comes to a bailout as there are so many different nations involved. The simple solution would be to simply allow these banks to default and go into bankruptcy. Sure, many bond holders would lose money, however, the crisis would be solved. The problem is that the bond holders are the banks.
In the United States the biggest and most important bank to follow is J.P. Morgan Chase & Co. (NYSE:JPM). This bank might be the most important bank in the world when you think about it. Traders should follow this stock closely, when the stock declines it is a sign that the markets are going to decline. The opposite is true when JPM stock can rally higher the stock markets will usually rally. This morning, JPM stock is trading lower by 0.44 cents to $34.74 a share. Once again, this stock is lower and so are the major stock indexes in the United States. If by some chance JPM stock can rally higher during the trading session you will see how fast the major stock indexes reverse and trade higher. This stock is now the barometer for the stock market.
Other important financial stocks that traders should follow include Deutsche Bank AG (NYSE:DB), Credit Suisse Group (NYSE:CS), and UBS AG (NYSE:UBS). These stocks are some of the most powerful financial companies in the world. Usually, the financial sector will trade like birds of a feather that flock together, however, sometimes they break away from the pack and trade on their own. Traders and investors should still continue to follow JPM stock as it will usually tell us everything we need to know.