It's back to moving sideways for U.S. banking stocks.
This past March, we profiled the long, sideways trading pattern in XLF. This fund is a basket of the largest financial companies in America. Major holdings include JPMorgan, Goldman Sachs, Wells Fargo, American Express, and Bank of America. These are the companies that rise and fall with America's ability to earn money, invest money, service debts, and launch new businesses.
Last year, XLF enjoyed a huge rebound off its credit-panic lows. But in October, the uptrend faltered… and turned into a long period of sideways trading action. Several months ago, XLF rallied out of this sideways pattern. But as you can see from today's chart, that rally soon gave way to weakness that took XLF back to sideways.
We recommend keeping an eye on this big $13-$15 channel… and on the direction XLF breaks out. As we said, XLF's constituents are the backbone of our banking and credit system… so its share price is a good clue to what's really happening in the economy, no matter what politicians or CNBC commentators blather on about. Money talks and you-know-what walks. You can listen in with XLF.
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