Financial Follies:
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.
Regionals Troubled?
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.
Examples:
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.