The XLF relative to the SPY weakened all throughout late 2009 through late 2011 and the market continued to strengthen in an upward trend during that time. Fail. 4/29/14
so it did. The point though, is that the XLF began to weaken against the S&P very early in the last crisis, February 2007 in fact. I'm sure you'll agree that no one metric is likely to be a stake in the ground marked, "top," but the financials complex is probably one of the more important moving parts in the engine. 4/29/14
The XLF weakened against the S&P in that prior to the last recession/bear market, because there was a banking/housing crisis. There is no guarantee and probably unlikely that the next bear market/recession will be precipitated by a housing crisis, let alone a banking crisis. One observation is not statistically significant. 4/29/14
It may not be statistically significant in this context but banks remain the beating heart of the financial system. As such, they're never far away from the vortex of crisis and usually, they exhibit all the robustness of a casualty with a sucking chest wound when a bad thing happens. With vol and yields trading where they are, its only a matter of time. Even central banks can see that, such is their haste, led by the Fed, in instructing the banks to finally get their books in order before the next bad thing happens.
We all have our list of "things to watch," financials I'm afraid, remain at the top of mine. 4/30/14
Dink
