We’ve taken a cautious approach to Financials since the banking turmoil in March took the sector from ‘breakout watch’ to multi-year relative lows in just a few days’ time. They haven’t been able to staunch the bleeding since then – Financials keep drifting closer and closer to their 2020 lows when compared to the S&P 500 index.
On the bright side, 14-day RSI has not yet re-approached the lows it set at the height of the banking crisis. Unfortunately, prices have done nothing to confirm that potential bullish momentum divergence. The ratio keeps drifting lower, and we have no reason to bet on a big bullish reversal until we see clear evidence otherwise.
On an absolute basis, we’re encouraged by the sector’s ability to remain above support from the pre-COVID highs. If you’ve been reading our reports, you know that those highs coincided with peaks set in 2007 and 2018. We can’t think of a more important level to hold.