Last week I showed the broad strength in financials (with a cover call on the BAC short) and mentioned that as the position was accumulated around early December, it would take a little time to unwind those accumulated stocks-meaning distributing into higher prices, BAC as well as several other charts I've been keeping track of in the financial sector are now seeing heavy negative divergences.
Looking at this as a micro version of the 4 stages of a stock/market cycle, November and before would be stage 4 (decline) , the white arrow is stage 1 accumulation, the green arrow is stage 2 mark-up, the 60 min chart is now entering stage 3 distribution.
The 15 min chart shows the accumulation (white) stage 1, and a heavy negative divergence now-stage 3 distribution-topping-stage 4 is decline.
The 5 min chart is filtering through the longer timeframes in a very bad negative leading divergence.
Why is this of interest, first the BAC trade could be back on, but most importantly, the financial heavy S&P has been supported the last week or so by gains in financials.
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