Watching Financials Closely Up Here

One of the biggest surprises of 2012 had to be the strength out of the financials. As we mentioned in December, this group was the best performing sector for the year, finishing up 26%. So now that we know who the leaders are, we look to them for either signs of more to come or a rollover in equities.

The relative chart of financials here, I think is an important one. You see, while the stock market has been roaring higher, the Financials, on a relative basis, have been trading sideways all year. This sustained relative underperformance is warning sign #1 from this group.

2-11-13 xlf vs spy

Look at the flat action the past 5 weeks, and look at momentum, so far, making only lower highs for the year.

There are also a couple of individual names in the space that we’ll be watching closely this week. The first chart shows Citigroup, a stock that appreciated by 50% last year, consolidating in a nice ascending triangle formation. I would expect to see a breakout here if these guys are going to keep rocking. A rollover below that uptrend line, however, could prove costly:

2-11-13 C

And finally, here is good old Goldman Sachs – a stock that went up over 40% last year. On Thursday, the stock hit its 161.8% Fibonacci extension target. I know I know, don’t pick tops. I’m not and I won’t. But if this one is going to pull back, this would be a logical place for it to start.

2-11-13 GS

Go back and pull up the charts of some of the European names that got crushed. A lot of them topped out at the same Fibonacci extension levels.

Just something to watch a little closer to start the week…

*If you’re in the NYC area, come by the New York Society of Security Analysts Tuesday at 5:30. I’ll be giving a presentation on Technical Analysis for the Market Technicians Association. This event is Free for everyone in attendance, including non-MTA Members. RSVP here


Tags: $GS $XLF $C $SPY