"When I evaluate the underlying fundamentals in the financial sector, I find myself ready to back up the truck," notes Louis Basenese, editor with The Oxford Club. Here he looks at a financial ETF.

"Recently GE shocked the world when it missed earnings expectations by seven cents because of difficulties in its financial services business, the seventh largest in the United States. Then Wachovia posted a worse-than expected $1.1 billion loss.

"Next was Washington Mutual which reported a $1.14 billion quarterly loss, worse than expected. And Merrill Lynch had a quarterly loss of $1.96 billion, also worse than expectations.

"Not to be outdone, the bottom of the line-up, regional banks (Comerica Inc., KeyCorp and PNC Financial Services Group) also struck out, reporting worse than expected first-quarter net income and/or mounting credit-loss provisions and net charge-offs.

"Remarkably, the Financial Select Sector SPDR (ASE: XLF) has barely budged. Indeed, its 15% higher than where it was when Bear Stearns collapsed.

"To me, when you keep piling on the bad news and prices don't head notably lower, a bottom (or darn near close) has likely been reached. It's believable too. Financials have thrown out everything AND the kitchen sinks in recent reports.

"So why act now? Because the downside's protected. Thank the Fed. Its 'bailout' of Bear Stearns put a safety net under the sector. That's not to say a major bankruptcy is impossible, but it's highly improbable and unlikely to push the XLF to a new low (below $22.29).

"And the upside could be huge. The last time the XLF bottomed out in March of 2003, it handed those brave enough to buy a 113% gain, including dividends over the next four years.

"Also adding urgency is the fact that short interest in the financial sector keeps hitting new highs. Eventually everyone will be forced to cover (by buying shares). And that means the reversal will come swiftly. If we're not positioned in advance, we'll miss out on a good chunk of the upside."

Each day, Steven Halpern's TheStockAdvisors.com offers the latest market commentary and favorite investment ideas from the nation's leading financial newsletter advisors.