I am not a banker. I rarely write about the USA bank sector. Today is a new day! Here is a view into the Financial Sector in the USA.
I don't think we should change the ticker to CLIFF just yet, but this appears to be breaking down.
This daily chart has lots of negative divergence.
My main concern here is all of the blogs recently have played out as an intermarket package.
The major tech stocks have broken down. The Dollar is gaining strength, the commodities analysis as an economic indicator is working. Copper was not able to hold its MA as discussed. Financials leaving the party is one of the final nails in the coffin.
At some point I expect a bounce, but I feel like this is a major top and having this financial group confirm it is troubling. If we can't find yield in the bond market and we have slowing global growth, it leaves very few places to park. That's troubling.
Here is a look at the Canadian financial sector.
The small negative divergence on the right edge of this chart is normally not a big deal. But if the overall global market swoons here, these stocks will as well. Following the XLF over makes it a big deal.
I expect the Canadian banking sector to roll over with the US sector. I am specifically concerned about the Canadian Governments efforts to drop Canadian housing speculation and becoming a little too successful! This sounds like the Chinese banking story after slowing real estate 2 years ago.
Here is a chart of the XLF with the Canadian Financial Sector overlaid. You can see the Canadian Based Financial sector is underperforming the broad XLF.
At the bottom is a 6 month correlation. Doesn't get much tighter than that.
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Good Trading,
Greg Schnell, CMT
