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Depicted on the three Daily charts below are a ratio
comparison of the Financials ETF to a Major Index in the U.S.,
European, and Chinese equity markets. They show how the ETF has advanced
compared to the Index. In all three cases, the Financials have outperformed the
The U.S. XLF:$SPX ratio chart shows that the
Financials ETF is up against formidable resistance and the RSI is nearing
overbought territory. The rising 50 sma is still holding just above the rising
200 sma. Any breakout above the last swing high would likely be met with more
resistance until the RSI reverts back to, at least, the 50 level. We may,
however, see another attempt to make a higher swing high first. Under such a
scenario, I'd look for a negative RSI divergence to signal that a pullback may
be around the corner, which could then send the RSI back to 50, or
The bloom is definitely off the rose of last week's rally above the descending trendline. Of course, this is a pretty short-term line, but all the same, Friday's surrender of the 7.8% (snicker/guffaw) unemployment rate and today's continued weakness is definitely challenging the integrity of that trendline as support.
It should also be noted that the weakness of tech leaders like AAPL and GOOG have caused a marked divergence in the NQ performance (in black, below) are compared to the ES.
As I was suggesting it might, SPX tested the highs and the upper daily bollinger band on Friday and reversed there. That leaves a possible short term double-top in place on SPX which would trigger a target in the 1385-90 area on a break below the late September low at 1430. I'm not actually expecting that to happen, 65% of double-tops never make it back to the valley low, but it's something to bear in mind. Until that happens though there is very big support around there at SPX rising channel support, the lower bollinger band and the 50 DMA and that would be hard to break below: