What If Financials Breakout To All-time Highs As Well?

JC Parets
December 5, 2019

Did you notice that the U.S. Financials Sector Index is just 3.5% away from its infamous all-time highs in 2007 before the financial crisis?

That's right, $XLF is approaching this level once again, for the 3rd time in almost 13 years. Is this finally going to be it? Are we really going to start a new bull market in Financials?

I think yes and I'm going to tell you why.

First here is the chart I'm referring to and its 3rd attempt to get through this level:

Click on Charts To Zoom In

The way I see it, why shouldn't we expect $XLF to surpass these levels if all its cousins already have. Below is the Regional Bank Index Fund $KRE, the Broker Dealers Fund $IAI and the Insurance Index Fund $IAK all holding above their 2007 highs.

Notice how they successfully retested this breaking throughout the correction over the past couple of years, and now they're moving higher:

Let's remember that the largest component of $XLF is actually Berkshire Hathaway, which is a major shareholder of Wells Fargo (hence the underperformance). To me it's only a matter of time before the Sector Index itself follows these industry groups higher.

Going over the pond, the European Banks could potentially be putting in a pretty serious double bottom.

It reminds me a lot of the Consumer Discretionary Sector in 2009:

If European Banks are doing well, I have a hard time believing that US Financials are acting poorly. This is a serious gauge of risk appetite for this stuff and if even the European Banks are going up, let's just say the world likely won't be ending in that environment.

This doesn't look like a downtrend to me:

We talk more about this in the Special Live Conference Call this week for Premium Members. All Star Charts Members can watch here.

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Let me know what you think

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