Financials Update

After skimming through some 3C charts of what I call the 3 pillars (of the 10 major market sectors), Financials, Energy, and Technology (I don't consider any rally viable without the support of all 3 groups whereas the market can rally without something like Discretionary), it is becoming my opinion that any market bounce would be led by Energy and Tech which would make some sense if there's a Euro rumor floated as the $USD would drop in value and Energy prices would move up to compensate and Tech obviously because of APL's event.

This (weaker bounce) may set up some nice short trades in financials, many of which were hammered today.

Here's a look at Financials/XLF

 First, today XLF saw the biggest 1 day drop since the rally started at -2.43% (remember, on the way up, the average percent gains were .20-.45%-very small, just very consistent). Today's move in XLF took out about a month of longs.

 XLF daily, you can see the accumulation in Financials as I mentioned back in August/September and going in to the October lows. Since, we have  negative divergence on a daily chart which is a very strong signal.

 Here's the hourly negative divergence, note how it worsens at the top when financials start rounding over.

 Here's a 30 minute leading negative divergence, again it was worse at the recent rounding top.

We can see on a 5 min chart the divergence as well in to that rounding area, there is a slight positive divergence, which I would expect to see considering my broad market expectations, but Energy and Tech seem to have an edge o financials. Perhaps we see a gap fill and that could set up some individual names, I highly doubt Financials can make a false breakout new high.

Just for comparison, take a look at a few of the inverse ETF for financials, FAZ, this is a 3x leveraged short on financials.

 Note how the long term charts are directly the mirror opposite of XLF, this again is the kind of confirmation I like, they are showing positive divergences.

Below is the 2 min chart, FAZ jumped +6.55% today, yet we see a small negative divergence, suggesting a pullback tomorrow, this fits well with the market theory I have and the other charts we have seen.