Financial Select Sector SPDR ETF (XLF) Points to a Rally in Financial Stocks
by Sam Collins 01/24/08Financial Select Sector SPDR ETF (XLF) -- This index of the financial components in the S&P 500 includes an array of diversified financials from investment management to commercial and investment banking.
On Dec. 20, we stated, "Since May 31, the index has tumbled by over 25% and now appears to be trying to establish a bottom with the stochastic arching up. But the low of Nov. 26 at $28.10 must hold or it will add a new leg to an already steep decline, and if that were to occur it is doubtful that the S&P 500 lows made in August and November at 1,407 could hold, either."
The Nov. 26 low was broken, as was S&P 1,407. But the first real daily reversal (up) since the big break at 1,375 occurred yesterday, and the XLF could rally through the downtrend channel and the 50-day moving average before running into trouble at just under $34. This rally presents investors with a good opportunity to offload their troubled financial stocks.
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The charts are bullish for both indices, and it looks like they could reach my immediate target.
Thursday's dramatic acceleration, coupled with a 'key reversal day' on Monday, leads me to the conclusion that the markets will continue to rise.
Our internal indicators are now telling us that stocks are still a good value at this level.
The recent pullback in the First Trust ISE-Revere Natural Gas Index Fund (FCG) could offer a good opportunity to accumulate shares.
Unless the S&P 500 closes below 1,020, investors should be buying into this decline.
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