Wednesday, March 31, 2010

Financials Sector: XLF Quarter End Update

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XLF is down -0.31% for the week, up +8.65% for the month, up +10.76% for the year (and QE 3-31-10), and up +154.79% since the March 9, 2009 market bottom. XLF has rallied since mid February.  The XLF is a financials ETF designed to represent the financial sector of the S&P 500, which is 16.42% of the S&P 500. See the XLF Financials portfolio holdings here. Top 5 holdings currently are: Bank of America 10.24%, JP Morgan Chase 10.18%, Wells Fargo 9.19%, Berkshire Hathaway 'B' 7.76%, and Goldman Sachs 5.19%, a total of 42.56% of the portfolio. This is a very popular and liquid ETF.

XLF Daily Chart
Below is the XLF daily chart for 2010.

Noteworthy Closing Prices on daily chart below:
Current 15.95 (Second highest yellow line)
2010 YTD 3-29-10 High 16.02 (Highest yellow horizontal line)
YE 12-31-09 14.40 (Lowest yellow horizontal line)
10 Month EMA 14.49 (Third highest yellow horizontal line)

XLF: Pulled Back Below 2010 YTD Closing High

Intermediate-Term Trend
The intermediate-term signal, the comparison of the 25 day and 50 day simple moving averages, signalled a bull market for the XLF on March 15. That is, the 25d sma is greater than the 50d sma. A bear market signal had been in effect since February 12, 2010.

The current closing price, the second highest yellow horizontal line, is just below the 2010 YTD 3-29-10 closing high of 16.02 and is attempting an upside breakout. This is recent resistance. There is also longer-term resistance from October 2008 consisting of some very dramatic sideways trading.  There is some price action from November 2008 but this does not appear significant.

There are multiple levels of support below, including the sideways trading in March.  Most notable near support is the October 14, 2009 closing high of 15.73 area.

Moving Averages
The 25d sma stopped descending on March 1 and bounced up. The 50d, 100d, and 200d sma's continue to ascend. The 25d sma has regained the 50d and 100d sma's. The 50d sma has regained the 100d sma. XLF regained the 25d, 50d, and 100d sma's.  All the moving averages are beginning to shape up and look good.

Uptrend Line
The uptrend line, a rate of price ascent, is from the March 6. 2009 closing low of 6.18 up through the February 8, 2010 closing low of 13.66. The February 8 closing low has been the bottom for this 2010 pullback. XLF struggled with this trendline for several days before a breakout above on February 16.

Downtrend Line
The downtrend line, a rate of price descent, is from the June 1, 2007 all-time closing high of 38.02 down through the March 29, 2010 closing high of 16.02, the peak YTD closing high so far.

Relative Strength Index (RSI)
RSI 14 day = 65.49 is reasonable and descending
RSI 28 day = 75.78 is overbought and has
The RSIs are reasonable due to the recent pullback and consolidation trading.

MACD (12,26,9)
The MACD is now bearish, effective Wednesday, March 31.

Long-Term Trend
The third lowest yellow horizontal line is the 10 month exponential moving average from the monthly chart, which I have overlayed on this daily chart. That is the line in the sand, so to speak, for the long term signal of a bear market. The XLF is above this signal at the current close, the second highest yellow horizontal line.

XLF has pulled back from the recent 2010 YTD closing  high.  The RSIs are reasonable. I believe XLF will ultimately break through upside to new 2010 highs.  Much consolidation trading could occur beforehand, which XLF has done in the past.  If and when this upside break through occurs, there is long-term resistance above, but an upside breakout of 1.00 or so could easily occur.  The intermediate-term trend is bullish. The long-term trend remains bullish.

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Seeking Alpha