XLF Financial Sector: Weekly linear: XLF Topping Soon??Although the DJIA and the SPY keep making new highs, the XLF hasn't quite made a .618 correction. This in itself would indicate some weakness and indicate that when or if a major bear market develops it may be a big loser. The way I see the price action from the 2009 low to now is a A-B-C correction with the B wave the form of an expanding triangle. Using this concept it forms a good looking (to me) channel. One fairly common relationship is for the C wave to be a fib relationship to A. Commonly C=A, or C=.618x A, or C=1.618x A. Another somewhat common occurrence is for a correction to be a .618 retracement. Both of these may occur soon at the rectangle labeled C? I will be watching this action the next few weeks for signs of a reversal then go short. Hope this is helpful. Have a great upcoming week.
XLF trade ideas
XLF $24.17: Forms a 6-month symmetrical triangle patternXLF has been consolidating within a 6-month symmetrical triangle pattern (from October
15, 2014 low and December 29, 2014 high). The key support lies at 23.78 (March 26, 2015 low), near the triangle lower bounds and the 200 day moving average currently at 23.64. While the 23.78/23.64 support area holds dips, if bulls manage to reclaim 24.54 decisively (April 16, 2015 high near the triangle upper bounds), that would suggest a triangle breakout and trigger further gains towards 24.78 (March 23, 2015 high) then 25.14 (December 29, 2014 record peak). However, a breakdown below the 23.64 support area would signal topping and weaken towards 22.89 (February 2, 2015 low).
Outlook:
Short term: neutral
Long term: bullish while above the 200 day moving average
Will the financial settle with this pullback? Financials, which have been driven higher by the Fed and the ECB, is in an interesting sell zone.
We have minor structure level as well as the top of a rising Wedge.
We've already seen false breaks in both sides of the Wedge as the ETF ranged from 25$ to 23$ and now, judging by the decrease in volume $XLF may be setting up towards its next strong move.
Above 24$ we will probably see the re-test of previous highs and even new high. I don't like the R/R for the upside trade.
The bearish setup here is to trade the sell zone and place a stop loss above previous high. The potential targets (if the price will break below the lower trend line (dashed green) will be the 200 SMA line and the 22$ support zone
JBI - Just Box Itclassical break out momentum continuation play. not really happy with the stop placement, but there should be some support below the break out candle, due to the prefect bullish separation. considering the recent market action, there is a real chance that this turns out to be a bull trap. that being said, a setup is a setup.
Financials are getting weakerIt's been way too long since there was a serious correction. A bull market usually lasts for about 4 - 5 years. The current bull market is 6 years old! The last serious correction was in 2011. Everybody is excited by this new record high for the Dow. How can anyone be excited knowing the age of this uptrend??? All major global indices are on the spot of huge bearish divergences. The VIX is at a very low level. The New High - New Low indicator that Dr. Elder calls the best leading indicator is showing massive bearish divergences. The earnings season did not exceed any expectations, with most stocks posting dissapointing results( I don't check the raw numbers, but it's vissible on the charts). The FED is exiting the QE program. The seasonal bullishness is fading away, as summer is coming. Why go long ??? It's time to short. When will this correction or the bear market finally come?? It's impossible to tell, all I know is I do not want to go long just because the Dow is at a historical high.
There's not much to say about the chart presented here. I think the labels are telling all the story. Momentum is fading away, and deviations from the Wave are getting smaller, and the MACD lines are showing a double bearish divergence.
I want to take the short side using the daily chart. At this moment there is no setup, neither here, neither on the daily. The point is to look for shorts, not for longs.