We don't have bull markets without the financials. It’s a key sector for markets, not just in the US, but all over the world. So, let’s talk about the Financial Select Sector SPDR Fund (XLF), notes JC Parets, founder of AllStarCharts.
It starts with credit. If there is real credit risk out there, you're going to see it impacting the financial stocks. Here's a look at the XLF, which is dominated by names like Berkshire Hathaway Inc. (BRK.A), JP Morgan Chase & Co. (JPM), Goldman Sachs Group Inc. (GS), Bank of America Corp. (BAC), and others.
This $47 - $47.50 level is a big one. We call this “Overhead Supply,” meaning that so far, the sellers have proven that they're overwhelming the buyers near those prices. Or in other words, there is more “Supply” for this Index ETF at these prices than there is “Demand” for it.
As long as that remains the case, I would expect the choppiness across the major indexes to persist. The ability for markets to take financials higher from here would be a major development for the bulls, and would likely mean that we are, in fact, out of the proverbial woods.
We'll be monitoring these levels closely, and we would encourage you to do the same!
