The Fuse is Lit for a Move in Financials
- Posted by Greg Harmon
- on June 14th, 2012
So many factors are coming together for the financial sector that you have to wonder if it will explode like a firecracker or turn into a dud like a sparkler. The chart below of the Financials Select Sector SPDR, $XLF, shows an ETF that has pulled back since mid March when the crap hit the fan in Europe again. But the price is now at key levels on many fronts. Sitting just above the 38.2% Fibonacci retracement of the October 2011 to March move higher, after bottoming at the 50% retracement level, the next stop higher is at 14.79 upon separation form the 14.03 area. From a separate perspective, it is also pressing against the resistance of the downward trending channel shown in the dotted lines. A break above triggers an expected move of 1.30 or to 15.50 at the
Financials Select Sector SPDR, $XLF
current level. It also shows that 14.20 is a significant support/resistance level. As it is at this juncture the Relative Strength Index (RSI) is trending higher towards the bullish zone, and the Moving Average Convergence Divergence (MACD) indicator is positive and growing after trending higher for 3 weeks. These support a move higher. But there are other factors as well. Sentiment has been negative on the sector since the latest Gyro-gate and that is possibly ending this weekend with the vote. And Global Central bankers are squawking about providing liquidity. None of this is a recipe to run out and buy anything. But be prepared for when the director shouts ‘action’ because if it does explode it could move far fast, still 10% below the where it was prior to the move down. Global Investment Banks will be the biggest winners.
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Gregory W. Harmon CMT, CFA, has traded in the Securities markets since 1986. He has held senior positions including Head of Global Trading, Head of Product Development, Head of Strategy and Director of Equity. (More)
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