RealMacro

XLF In Trouble? Short Setup

Short
RealMacro Updated   
AMEX:XLF   SPDR Select Sector Fund - Financial
There is a common misconception that higher rates are bullish for banks. This is wrong! Banks make money
on a spread between short-term bonds 2yr or less and loan out at 10 years or more. Thus when the yield curve
collapses as it is doing right now. Bank profits are dwindling as there is less margin for risk-taking when making loans.

Dec. 3rd I posted this chart below and said this chart should scare the hell out of you.

The simple way to read it is when the spread drops so do bank profits. As a result, earnings should fall. Couple that with
the chart indicating a break of a long term up the channel and we have ourselves an excellent short from a risk-reward perspective.
As always I remind everyone this is a key area. As such it can go either way. But the bias for me is to the downside.
Comment:
While "experts" are falling all over themselves to tell you about Credit Suisse. I warned people almost a year ago about XLF

Disclaimer

The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.