Shares of the Select SPDR Financial ETF (NYSE: XLF) took a beating on Friday as fears of non-confirmation for Federal Reserve Chairman Bernanke rose.



Chart Courtesy of StockCharts.com



Keep an eye on XLF on Monday. The ETF broke well below three key support areas on Friday. First it fell below 15. Then it took out its 20 and 50-day moving averages.

In fact, the ETF closed near its October and December 2009 support levels, which means that a break below this key area would likely lead to a possible series of new lows.

The financial sector is clearly under pressure from Washington. President Obama is trying to fine the banks after many of them have payed back their TARP loans.

The market is also alarmed about the potential separation of deposit bank functions from investment bank functions in large conglomerates such as Citigroup and Bank of America.

While the fine is not a great idea, the separation of functions isn't a bad idea at all. The problem is how the White House wants to go about it. Instead of doing something in a way that worked before, such as just updating the Glass-Steagall act, which was repealed by President Clinton and Congress, the White House wants to impose measures that would make life hard for banks.

If the separation of investment banking and commercial banking can be put together in a decent way, we could actually get something good out of it.

For now, though, the action in XLF is likely to be very volatile.

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