Thursday, April 8, 2010

S&P 500 Financials Sector: XLF Update

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XLF Overview
XLF is up +2.49% for the week, up +3.3.32% for the month, up +14.44% for the year, and up +163.26% 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 6 holdings currently are: Bank of America, JP Morgan Chase, Wells Fargo, Berkshire Hathaway 'B', Goldman Sachs, and Citigroup which are 47.23% of the total portfolio. This is a very popular and liquid ETF.

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

Noteworthy XLF Closing Prices on Daily Chart below:
Current & 2010 YTD 4-8-10 High 16.48 (Highest yellow line)
YE 12-31-09 14.40 (Lowest yellow horizontal line)
10 Month EMA 14.85 (Third highest yellow horizontal line)

XLF: At 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 bull market signal had been in effect since March 15, 2010.

The current closing price, the highest yellow horizontal line is the 2010 YTD 4-8-10 closing high of 16.48. There is no recent resistance. There is some price action from November 2008 and a closing peak of 16.50 on 11-4-08. XLF has reached this possible long term resistance.

There are multiple levels of support below, including the sideways trading in March. XLF is just above some October 2008 dramatic sideways trading.  Most notable short term 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 fan out in a bullish pattern.

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 of the 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 = 76.00 is overbought and has spiked up; yet below high of 95.86 on March 17
RSI 28 day = 83.33 is very overbought and has leveld off; yet below high of 84.19 on April 5
The RSIs are indicating overbought conditions and predicting a pullback and consolidation.

MACD (12,26,9)
The MACD is now bullish, effective Tuesday, April 6.  MACD had briefly been bearish.

Long-Term Trend
The middle 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 well above this signal at the current close, the highest yellow horizontal line.

XLF is at a 2010 YTD closing high. The RSIs are signalling overbought conditions.  The MACD has flipped to bullish.  XLF may well pullback and consolidate before another push upwards.  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