The Select Sector SPDR Financial ETF (NYSE: XLF) is picking up steam, as Wells Fargo (NYSE: WFC) shows some strength.



Chart Courtesy of StockCharts.com



Back in February, we noted how shares of Credit Suisse (NYSE: CRP) had been outperforming those of other banks. We were impressed by CRP's steering of the financial crisis by making their bankers work hard on making "toxic" assets work, and by making the bankers take ownership of the assets and actually turning them into profits.

Wells Fargo did a somewhat similar thing on its own, when it bought the distressed assets of Wachovia. Now Wells is making money as it has expanded its reach via Wachovia's far ranging network of loans.

What we like about both banks, and others at this point, is that after a couple of tough years, it looks as if they are actually making the transition toward some kind of stability.

To be sure, bank failures continue. And there are still a lot of potential problems ahead with both commercial and non-commercial real estate. Both sectors are due for a massive amount of loan resetting. And the expectations are that a lot of banks are not going to restructure too many loans on either side of the aisle.

Yet, some insiders suggest that because of the way the deals with the government have been set up, even when a bank "loses" money on a foreclosure, by the time all the i's are dotted and the t's are crossed, the banks actually make money on the deals. This would explain the improving profit picture for banks despite the expectations for more trouble ahead.

The charts of many financial stocks have shown a great deal of improvement in the last couple of days. That suggests that investors are starting to believe that the worst may have passed. That, of course, remains to be seen. But from a trading standpoint, the charts rule.

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