Some one in my site's free chat room asked me about Financials today and i posted some charts …. here they are along with some others.
XLF – Weekly GANN
I look to GANN long term charts to get a good sense as to longer term support and resistance. The XLF weekly GANN chart clearly shows the $14.80 and $14.00 levels as great spots to look for support and the $19.00 area as the most logical target.
XLF – Daily GANN
The horizontal GANN line at $16.20 is an important hurdle … we have spent three days underneath this level. If we don't get above this level tomorrow or Monday at the latest, I see further downside ahead.
XLF – 60 Minute GANN
On the 60-min chart, $16.15 is the important level for tomorrow and the $15.98 as support.
Look at the weekly chart here and the support Trend Line …
The weekly Trend Line support is at $16.14 just above the close today at $16.09.
I occasionally like to take the price candles off of the charts and look at the moving averages as a way of looking at the underlying trend … here is XLF's 5-minute chart:
Notice how the stairs stopped going lower and the 20EMA and the 50EMA are on the verge of going through the 200SMA and start moving higher.
Stepping back from the charts, does it make sense that financials lead us higher if we are indeed going to bounce from an oversold condition. If investors are still worried regarding global economic growth, they may on the margin move money out of the GoGo areas of tech and materials/commodities and return to good old financials as a place to shift money.
Here is the relative chart that I have posted before …
As you know we did break a large down trend line in December and since early January, financials have been correcting their new out performance. The pull-back has been contained to the 61.8% retracement level and any near term out performance will get the relative line above the 20/50EMA's.
Aside from a possible sector rotation, what can kick start the relative performance? The Wall Street Journal reported today that the Federal Gov't is scheduled to allow the banks to increase dividends starting tomorrow.
That news is somewhat known by the market, but sometimes it just takes a little focus for the market to decide to rotate into a sector.
Here are some Sentiment Trader Rydex charts for financials … I like to look at these to see how much "in" or "out" of favor sectors are.
The thing to focus on here is the % of assets of Rydex investors in the financial sector … basically it is at the levels that mark lows – about 2% of total assets.
Here is their sector breadth for financials …
The second panel in this chart is the McClellan Oscillator that I love so much … today's action bounced this indicator from the deeply oversold indicator and it still has room to move higher.
The second and third panels are the % of stocks that are trading above their 10 day and 50 day moving averages … these indicators show how washed out the sector is. Sector rotators love to move money into sectors that are beaten up as much as these.
Having said all of this, the sector will move in the short term with the overall market. Any out performance will be gravy if the overall market can gain some traction here.
I will leave you with a chart I posted in the Chat Room today on BAC as well as the relative daily charts for the two leaders of the sector BAC and JPM.
For full disclosure I bought some BAC at $13.91 this afternoon and intend to buy more on the break of the triangle at the $14.50 level.
Cheers … Leaf_West
