The Financial Sector Continues to Slide in Relative Performance

This morning we are seeing financials ($XLF) falling again in relative performance against the S&P 500 ($SPY). I’ve discussed this relationship a couple of times in the last few months and we are seeing a test of a lower low as the financial sector continues to weaken.

First in July we looked at the divergence that was being created in the ratio chart of $XLF:$SPY but I showed the trend lines that would need to be broken to confirm a shift in relative performance. In August we saw those trend lines break as the overall equity market began to outpace the financial sector. After the longer-term trend line gave way we’ve seen a continued decline in $XLF’s relative performance to $SPY over the last two and a half months.

I wanted to bring this chart back up as we test the lower low made in September. I’m watching this lower low to see if financials can regain their footing or if we’re in for more bleeding.

financials

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About Andrew Thrasher, CMT

Andrew Thrasher, CMT is a Portfolio Manager for an asset management firm in Central Indiana. He specializes and writes about technical analysis as well as macro economic developments.