This week, I blithely accumulated call options on Goldman Sachs (GS) ahead of and after the Federal Reserve’s latest declaration on monetary policy. I assumed that the Fed’s calming influence would remind market participants that the economy is fine and the prospects are good. Under that scenario financial stocks would do well as long-term interest rates firmed up. The Fed did one better by upgrading its economic outlook. None of that news mattered as the stock market suffered two straight days of heavy selling. Amidst the selling, GS lost 6.3% and broke down below its 50-day moving average (DMA).

Goldman Sachs dropped 2.9% and closed well below its lower-Bollinger Band (BB). A dangerous test of 200DMA support is coming fast.

Instead of increasing, interest rates declined as scared investors took some refuge in government bonds. I chose to fade the iShares 20+ Year Treasury Bond ETF (TLT) with put options as it hit 50DMA resistance that happens to roughly coincide with the close from 2015. The time on this trade is surely already ticking!

The iShares 20+ Year Treasury Bond ETF looks like it is trying to bottom despite short-term rates continuing to march higher (flattened yield curve anyone?)

Suddenly, the financials have gone from promise to vulnerable. The Financial Select Sector SPDR ETF (XLF) lost 3.0% on Friday and closed just above its uptrending 200-day moving average (DMA). XLF lost 6.8% for the week.

The Financial Select Sector SPDR ETF closed at a 4-month low and is set-up with a precarious test of 200DMA support.

While the carnage in financials is stark, the spotlight is REALLY on Germany’s Deutsche Bank (DB). DB gapped down on Wednesday on news that it had to drop the price on the IPO of its asset management unit. The CFO also talked about challenges to DB’s business from a strong euro (FXE) and increased costs. The stock plunged two more times to close the week. DB lost 13.1% on the week. The stock is also down 27.7% year-to-date and looks very vulnerable to further losses. Suddenly, I am not so sanguine about my bets on European growth.