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The charts, graphs and comments in my Trading Blog represent my technical analysis and observations of a variety of world markets...
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Sunday, January 14, 2018

Will U.S. Banks Outperform the S&P 500 Index in 2018?

* See UPDATE below...

The following Monthly chart of the Financial Sector (XLF) shows that it has been on a strong rally since mid-2017. It's approaching major resistance around the 30.00-31.00 level (prior all-time high and double Fibonacci retracement levels).


The following Monthly chartgrid of XLF and five of the major U.S. bank stocks (GS, C, JPM, BAC & MS) shows, at a glance, which of these stocks has, either, outperformed and made a new all-time high, or, underperformed XLF.


The following Monthly ratio chart of XLF:SPX shows that price broke out above its first major resistance level of 0.0103 (confluence of price and its 40% Fibonacci retracement level) at the end of 2017.

The next major resistance is around 0.0115 (confluence of price and its 50% Fibonacci retracement level).


Given what I said in my post of January 12 ("...the SPX may see some whip-saw action in the coming days/weeks..."), XLF may continue to outperform the SPX for, potentially, some time -- perhaps the first couple of quarters this year -- until we see further clarity of the Fed's intentions (short and longer term) regarding interest rate increases, as well as further developments in the November U.S. mid-term Congressional election, by the third quarter.

If so, keep an eye on whether:
  •  XLF can continue its push to spike through, and hold above, 31.00
  • GS and JPM continue to maintain their upward momentum, 
  • C, BAC and MS can strengthen their upward climb (all three have a long way to go to reach their prior all-time highs), and 
  • the XLF:SPX ratio can hold above 0.0103 and climb higher

* UPDATE January 21...

Continuing to watch XLF vs SPX...

Will the XLF:SPX ratio hold above its Friday closing price of 0.0105 (now near-term support, as shown on the daily chart below)? This is a new key level, along with its longer-term major support level of 0.0103, as noted above.

Keep an eye on the RSI, MACD and PMO technical indicators to see if they remain newly-bullish in support of a push higher for XLF.

SPX & XLF Monthly Price Comparison chart

SPX & XLF Weekly Percentage Comparison chart
(gains since Nov. 8, 2016 Presidential election)

XLF:SPX Daily Ratio chart