Banks (XLF): September Repeat?

May 22, 2019 / by Bill Noble

Long Bitcoin (BTC), short the banks has been a long-held Crypto rally cry, especially on Twitter.

Looking at a chart of XLF (S&P financial stocks ETF), it does look like financial stocks could drop sharply.

The pattern in XLF is very similar to the one that unfolded in September of last year. Back then, there was a sharp drop off a Fibonacci speed resistance line. Then, there was a dead-cat bounce that was followed by a very steep drop.

Looking at recent action, the current pattern appears to be similar in that XLF is failing near the same Fib resistance line (Figure 1).

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There’s a famous phrase in the equity markets, “Don’t go long into a long weekend.” This saying comes from the fact that the three day weekend makes it painful for traders to react to any potential bad news because of the day the market is closed.

Bottom Line: I think you have be mindful of the trade war or other geopolitical events having a negative impact on financial stocks. It will be interesting to see how crypto would react if there were a Black Swan event in the legacy financial system.  

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