Finance Sector Leads and Regional Banks Come to Life

2012 is ending with a bang for banking stocks as sentiment towards this sector improved significantly in December.  Perhaps the big banks are looking forward to open-ended quantitative easing in 2013. The chart below shows the Finance SPDR (XLF) breaking above its autumn highs to record a 52-week high. In addition, the price relative (XLF:SPY ratio) recorded a 52-week high as XLF led the market higher. On the price chart, broken resistance in the 15.75-16.25 area turns into the first support zone to watch on any throwback (pullback). XLF is a bit overbought after a 10% advance since mid November, which makes it ripe for a pullback or consolidation. However, any weakness would be deemed a correction within a bigger uptrend.

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Regional banks are not as strong as the big banks, but the Regional Bank SPDR (KRE) came to life with a triangle breakout. KRE surged in mid November, consolidated with a small triangle (pennant) and broke resistance with a big move. This is a bullish development and the triangle now marks a support zone. The indicator window shows the price relative (KRE:SPY ratio) surging above the late October trend line. 

Merry Christmas and Happy New Year!!
--Arthur Hill CMT

Arthur Hill
About the author: , CMT, is the Chief Technical Strategist at Focusing predominantly on US equities and ETFs, his systematic approach of identifying trend, finding signals within the trend, and setting key price levels has made him an esteemed market technician. Arthur has written articles for numerous financial publications including Barrons and Stocks & Commodities Magazine. In addition to his Chartered Market Technician (CMT) designation, he holds an MBA from the Cass Business School at City University in London. Learn More
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