Is Barclays in the crosshairs?

Sovereign debt exposure to PIIGS, exactly what brought down MF Global and caused Jefferies to have it's trade interrupted several times last week as circuit breakers kicked in as it lost over 20% in a day, and caused Jefferies to release their exposure last Friday saying it was not a problem, yet they still sold half of it over the weekend, is showing a new trend in the scrutinization of bank holdings-all of this which was not revealed as we know from Austria's mega bank ERSTE during the last 2 stress tests as they found accounting gimmicks to hide the exposure.

Well it seems Barclays is holding on to a little more then the market would like and this new development should be interesting over the next week or perhaps less.

BCS is holding $12.5 BB in sovereign via Bloomberg, over $20 billion risk to corporations which are in much worse shape in the EU then in the US, and another 10.2 bb in financial institutions which may as well be sovereign risk as no one knows what counter party risk any bank is holding due to the ineffective and useless European Bank Stress tests. There's another $66 bb in retail exposure, but the kicker there is 86% of that is in Spain and Italy.

BCS hasn't looked very good over the last several years, completely missing the 2009 rally and if they become the target of bank runs, rumors and bear raids, they may find that they are in the same quick sinking boat as MF Global and THIS is EXACTLY why I say this time is so reminiscent of the Lehman Era when liquidity absolutely froze as well as the credit markets because no one bank knew what counter party risk the other transacting bank was holding, it's nearly a spitting image except rather then subprime assets being the hot potato, know it is sovereign exposures of almost any type.

We'll use this post as a baseline of BCS and measure what happens over the next week or two to determine how out of control this situation may be getting.

 BCS weekly chart shows a dramatic decline during the 2007/2008 period and at the 2009 bottom, instead of rallying like everything else did, it simply travelled laterally and recently broke below support of 3 years. Volume looks a lot like a rounding top.

 Here's the current situation, not only is that hanging man with huge volume a bad sign as it indicates massive churning on the day in the white box, but today' loss is nearly a full percentage point higher then the implied Beta vs the S&P.

 The long term 3C charts are hard to fool, no manipulation of any length can through them off, so this 6 day hart shows confirmation at the green arrows and what a very small negative divergence in 2007 led to, the current negative divergence is much worse.

 Here's the hourly chart again with good confirmation of the downtrend, but the October rally failed to lift 3C much at all and remains negatively divergence and leading as well.

The 15 min chart also shows confirmation of the downtrend and a very weak showing on the October rally.

This is out baseline, lets see what happens this week and how much focus or how much of a spotlight is cast on Barclays. This information may be valuable for a trade, but more valuable in telling us where we are as far as a possible black swan event.