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So Goes the Banks, So goes the broad market? In 2007-2008, Financial stocks were a key contributor to the broad markets downside action, as XLF declined over 80% with the S&P 500 losing half its value.
Since the 2009 lows, financials have reflected a good deal of relative strength, out pacing the S&P 500 by a good margin (100%) . In the past two weeks XLF has broken above a rising channel and its 38% fibonacci retracement level at the same time. A positive for financial stocks and the broad market.
A key price point to watch for the financials comes into play at its 50% retracement level of the financial crisis, which comes into play around 11% above current prices!