XLF: Chart of the Week

XLF – Chart of the Week

This week we are talking about the ETF called the XLF, which is the select sector fund for SPDR for the financials – long.

As you can see here on the chart on the right hand side, the index has been taking a beating for the past six or seven sessions and has fallen through some really good support that it had at the 200 day moving average.

MACD actually rolled over a month ago – middle of February – for a sell signal. So it was actually a pre-cursor to what was going on here.

The XLF was making new relative highs back in the mid-part of February, but the MACD said, not so fast, Mr. Bull on the financials. It started rolling over before the index did. The index looked like it was going to catch some support at the smaller moving averages – the 15 and the 20 – but that was not to be done.

The parabolic SAR are also quite bearish. The other indicators down here at the bottom – the Chaikin Oscillator and the Chaikin Money Flow – also very negative and in oversold territory.

Now let’s remember that oversold does not mean buy. Oversold means if you have a position on, take it off, wait for a rally and see where you can get another short or play on at another time.

Now let’s take a look at a different view of the chart. This is the weekly chart of the XLF, and you can see it’s still holding a posture of higher lows – barely. At the 200 week moving average – that’s a terrible place to try to find support for a chart. We are not quite oversold on the RSI on the weekly chart. We do have a MACD rollover confirmed two weeks ago. The Williams Percent R, another stochastic oscillator, is also reaching oversold territory but not quite there yet.

Look at this heavy volume for the last two weeks. This is some heavy selling. See that price action – how poor it is? This is similar to what we had back in May 2022, when the index was just smacked. We didn’t quite get to the deep oversold reading – we’re almost there.

Would I want to be buying? No. Would I want to put in new sells or shorts? Probably not yet.

If I had some puts on, I’d probably be selling them or at the very least spreading them out to sell some puts below the long puts I had already.

You really want to find some support down here – this is pretty scary if you ask me – all the way down to the 24 level – that’s a gap that’s open from Oct – Nov 2020. It looks like the only open gap that I see on the weekly chart. But it gapped up huge around the election in 2020. Financials have taken off ever since, but it looks like this thing could be in trouble.