Whichever way you slice it the financials have not been the best of performers this year. Now one has to attest that is on a relative basis, as the XLF has still risen by 15.2% YTD, although that is the 9th strongest of the major 11 S&P sectors, besting only healthcare and energy. To get a more recent look at its action over the last 3 months it is flat (chart below is the 3 month behavior of all the major S&P sectors and notice the defensive nature of leading groups), and over the last one month timeframe it is the second worst major S&P actor, down 3.2%. The old belief that markets can not enjoy a healthy, sustainable rally without the groups inclusion has long been proved false, but their participation would be welcomed. There will always be pockets on strength in a diverse group, like insurance, but how some of the traditional online brokers have fared is horrible. ETFC AMTD and SCHW are all down between 26-32% from their most recent 52 week highs.
Whatever the reason a relationship exists, the chart, PRICE action will often paint a better picture. Below we take a look at the KRE, and also the ratio chart against the XLF. It has been lagging the XLF for sometime, and is in bear market mode down 21% from most recent 52 week highs (XLF is down by one third of that by 7% from most recent yearly peak). Give the fund credit for defending the very round 50 number on a CLOSING basis, registering a doji candle in the process, but I would not imagine meaningful strength going forward. Volume trends have been soft, and lower highs have been seen since last June on the weekly chart here.
We have not done too many financial notes in the last month, because we believed better opportunities lied elsewhere. Below is the chart of BR and how it appeared in our 7/3 Financial Report. We were WRONG, on this name as a bull flag breakout occurred the prior session, and notice how taut trade was dating back to late March. This is a best of breed name in the space, and it may be resetting here, with a bullish WEEKLY hammer candle off the round 120 number, but the catalyst for this idea is long gone. Discipline.