The Financial Select SPDR ETF (NYSE: XLF), is not very reassuring these
days, despite the bounce on 10-29.
Chart Courtesy of StockCharts.com
Financial stocks may have topped out, a fact that if it proves to
be true, may be signaling that the stock market might have seen its
highs for the year.
Financial stocks are clear market leaders. When they rise and fall, the markets
tend to follow. A perfect example came when XLF bottomed in March 2009, and the
rest of the market followed.
That's why the potential double top in the chart of XLF, and the fact that the
ETF has broken well below its 20-day moving average are important developments.
XLF has already given back more than 10% from its recent highs. Support is near
14. A break below that could take the ETF down to the 12.50-13 area in a hurry.
More important is the potential effect of weakness in these big stocks on the
market.
It's time to be very cautious in this market.
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