Monday's downside move in financial stocks shows it is not short sellers that are driving down the sector. It is simply the fundamentals.

There wasn't one short sale in the financial sector, following the Securities and Exchange Commission (SEC) ban, and look at result:

• Washington Mutual Inc. (WM) down 19 percent

• Wachovia Corporation (WB) down 19 percent

• Citigroup (C) down 2.5 percent

• Morgan Stanley (MS) down 1.5 percent

• Goldman Sachs Group Inc. (GS) down 5.8 percent

• JPMorgan Chase (JPM) down 12.5 percent

• Wells Fargo (WFC) down 11 percent

• Bank of America (BAC) down 8 percent

• Merrill Lynch (MER) down 7 percent

• Financial Select Sector SPDR (XLF) down 7.5 percent

This proves that the longs in the stocks simply don't want to own them and are giving them away at any price. Can everyone say revaluation?

Believe it or not, shorts play an important role on the bid side (to cover) and the offer side of the market, providing much needed liquidity to the market. Take away the bid (to cover) from the shorts and arguably the free-fall in shares of financial stocks could be worse.