Sunday, November 10, 2013

XLF Financials Daily Chart Overbot Negative Divergence Price Extended

Traders were tripping over each other in a race to buy financials on Friday after the monthly jobs report sent yields higher. The steepening yield curve forecasts happy times ahead for the banksters so traders front-run each other racing in to buy any stock in the financial and banking sector. Reference the previous article on Keystone's 2-10 Spread Indicator (type 2-10 spread into the search box) that highlights the 255 spread number for the 2-10 which would indeed forecast happy times for bankers ahead. The spread is currently at 243 basis points. So the big up in financials last week was not due to any fundamental news but instead simply due to traders believing in the launch higher in yields to continue.

The red lines show firm negative divergence remaining in place and price continues to be challenged by the 21 level for the last 4 months or more. The blue dots show price extended above the moving averages requiring a mean reversion (lower prices) even if a spurt higher occurs. Watch the short maroon lines in the right margin. If price prints a higher high than 3 weeks ago, watch to see if the neggie d remains in place to indicate a spank down on tap. The bulls may squeeze out some more consternation at these levels for a week or two ahead but the projection is sideways to sideways lower moving forward. This information is for educational and entertainment purposes only.  Do not invest based on anything you read or view here.  Consult your financial advisor before making any investment decision.

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