Still Waiting on the Financials, XLF

• Posted by Greg Harmon
• on November 4th, 2010

The broad market reacted to Quantitative Easing 2 (QE2) as expected.  I have explained in this space before that the only tool available to the administration is to devalue the currency and create inflation and what effect it would have (rising Gold and Stock prices, falling bonds). But it is interesting that as this has been happening one sector, financials, has not participated in the stock rally, and have noted that as well in articles attached below. I saw a lot of chatter today that this has now changed with the Financial Sector Select SPDR, XLF, breaking out of a range. I saw some promising action in that sector today but beg to differ with the conclusion. Look at the daily chart below.

Note in this chart that the XLF has traded in a range for over a year, discounting the March through May break out.  The top of that range has been 15.28, a level that was not breached or attained today.   It definitely had a great move today.  But not out of the range yet.  Now look at the weekly chart.

This weekly, although it has a day to go still, tells even more.  There is symmetry in this chart.  The channel to the left of the break out is almost the same length as the channel to the right of the break out.  Also note that the last candle does look to be heading to the top of the range.  Perhaps it will break tomorrow.  But it has not yet.  When you look at this weekly chart a bit more closely it might explain why the timing could be right.  Here is a closer look.

In this chart the influence of the election outcome can be clearly seen. Perhaps this is what was needed for the financials to participate.  We may see tomorrow.

Related posts.

SPDR Sector Review/Preview October 23, 2010

Contender, Surrender and Pretender: SPDR Sector Analysis October 3,2010

If you like what you see above sign up for deeper analysis and trading strategy by using the Get Premium button above. As always you can see details of individual charts and more on my StockTwits page.

The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

blog comments powered by Disqus