XLF Financials Weekly Chart Ovebot Rising Wedges Negative Divergence Price Extended

The drama with financials continues. The banks are supposed to lead the markets higher in 2014.  The tail is wagging the dog as traders trip over each other to buy financials and tech stocks without seeing proof that the economy is actually improving. Keystone continues to comment on the 2-10 spread of 255 which determines happy bankers versus sad bankers. The steeper the yield curve, the more money the banks make and that occurs with a spread above 255. Bears rule under 255.  The 10-year yield hits 3% and now pulls back to 2.97% with the 2-year moving around 0.40%. This is a 255-260 spread.  The bulls want to break out to the upside and prove that rainbows and blue skies do exist with a spread above 260 and the XLF catapulting higher. Don't hold your breath.

The red and blue rising wedges are long in the tooth. XLF has doubled in 2 years. Overbot conditions and the negative divergence should create the smack down. The daily chart is negatively diverged as well. The monthly chart, like the general market, is open to price coming back up to current highs after a pull back for a few weeks occurs. On the weekly chart above, price is extended well above the moving averages requiring a mean reversion and the 50-week MA at 19.54 has not been tested for over one and one-half years. Projection is a move lower for the days and weeks forward, say down to the 20-week MA at 20.67, at a minimum, and then a bounce higher again, say in the February-April time frame then a multi-year top should hold moving forward. In general, lower prices are expected for the weeks and months ahead. The drops out of rising wedges can be quite dramatic. Watch the 2-10 spread to see how it resolves in relation to 255. 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.