The SPDR Financial ETF has been snoozing for exactly three months, and now could be coming back to life.
Several patterns stand out on today’s chart. First and foremost is its breakout above the 50-day simple moving average (SMA).
Next is the tight volatility squeeze immediately before the surge. That suggests price could be ready to move again following a healthy period of rest. Relative strength has also improved (highlighted by our Smart Relative Strength script).
Looking back further to June 18 and July 19, we find double-bottom support around $35. XLF rebounded sharply following both moves.
Companies within the portfolio have also performed well. Goldman Sachs, for example, hit a new record high on Friday (its first in two months). Less flashy but important names like American International Group also beat estimates.
In conclusion, financials are one of the most overlooked stories this year. They in February. Now, after a few months of consolidation, their run to new uncharted territory may be resuming.
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