This just in. Financials are painting an ugly technical picture...
Observe how over the past year, depending on which side of the balance relative strength (top panel) and momentum (bottom panel) were on, the direction Financials were trending more or less was telegraphed.
Both measures at present are decidedly on the sell-side of their respective ranges. Thus, Financials appear poised to continue trending lower. An [increasing] volume trend as the XLF has fallen since April 1st likewise supports this probability.
Volume spikes occurring, first, upon decisive downside penetration of the 50-day moving average in March, and then Tuesday as the 200-day moving average was decidedly taken out, appears a noteworthy red flag furthermore warning of continued weakness ahead.
Financials have been marching to the beat of a different drummer for quite some time. Whereas broader-based indexes currently are thought likely to advance to a nominal new high off March '09 bottom sometime over coming weeks, the XLF appears to have seen its better days. It's possible a triple zig-zag (a-b-c-x-a-b-c-x-a-b-c) forming a complex Elliott corrective wave since March '09 bottom ended in February. So begins the Financials funeral march.
With Financials indicating a good probability of continued weakness, and a raft of technical measures at the doorstep of levels I have been targeting in anticipation of an upcoming, final move higher in broader-based indexes, the market currently appears in good position to sink further over coming days, that this final advance might then commence, and take the market to the precipice from which all too quickly even the Alan Schwartz clone over at Treasury likely will fare no better than did his counterpart at Bear Stearns...
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