XLF / Financials Update

As I posted yesterday, XLF Trade Set-up & Update, there's an area I'd like to see XLF to re-enter a FAZ (3x short Financials) position. The last position was closed Aug. 1st to maintain profits and re-enter at a better level so even with today's move, that was the right thing to do.

I think for the time being, emotional over-reaction is not the best idea, caution and making some preparations are, but that's different than an all out emotional panic.

Looking at XLF right now (as even I considered a FAZ long earlier on the news based on emotions rather than charts), here's what I see. There's some intense multiple timeframe analysis here so I'll try to be as clear as possible.

 This 15 min chart (the longest timeframe of all the charts in this post) still is leading positive which tells me whatever Wall St. is up to (selling/short selling), they are not done with the process.


Charts in the 1-5 min timeframes have shown steady deterioration in to higher prices which would represent larger positions either being sold or short positions being accumulated, both acts are selling. However the divergence is not strong enough yet to effect the 15 min chart above, this tells me that based on what I can observe as I'm not a fortune teller as far as what will happen in Ukraine over the next few days, patience is still the most reasonable path based on objective data.

 The 1 min XLF chart shows what I have been saying all week, that since the base broke out, there has been distribution (in the form of selling or short selling) in to higher prices the entire time, yet it doesn't seem to be over based on charts like the 15 min above.

However if we look at this same 1 min chart on an intraday basis...

We see the start of a small positive divegrence, suggesting there's an attempt to send XLF back up. This divergence and possible reversal to the upside are subject to a reversal process just like any others, although these parabolic-type moves often have a shorter reversal process.

The bottom line, I'll wait and remain patient, monitor the progress of this intraday chart and asses the probability of a move back higher, if it looks likely, I'll stick with my original plan laid out yesterday, if not then we should see the deterioration or failure of this early divergence in Financials which is also being seen in some of the major averages.