A Key Technical Event May Be Close To Occurring In Financial ETFs

technical-look“There is a key technical event that may be close to occurring in some of the major banking and financial stocks.  These have all used the 50-day moving average as a key pivot point since at least July, and of late this moving average has acted as resistance as well.  This may be representative of lower volatility, but if you look at the Direxion Daily Financial Bull 3X Shares (NYSE: FAS) and the Financial Select Sector SPDR (NYSE: XLF) this was particularly clear as well.  We looked further into key ETF components such as JPMorgan Chase & Co. (NYSE: JPM), Bank of America Corporation (NYSE: BAC), Wells Fargo & Co. (NYSE: WFC), and Goldman Sachs Group, Inc. (NYSE: GS).  Citigroup Inc. (NYSE: C) looked like it had an entirely different chart pattern because it is in a league of its own currently,” Jon Ogg Reports From 24/7 Wall St.

“We do not usually conduct technical analysis on the Direxion Daily Financial Bull 3X Shares (NYSE: FAS) because of its daily resets, yet you can see how it has used the 50-day moving average as a key pivot point from October through November and into December.  At $74.06 its 50-day moving average is $76.30 and the 200-day moving average is $59.71.  So shares are within about 3% of that key moving average, and this used to move 3% in one hour when the volatility was strong.   The Financial Select Sector SPDR (NYSE: XLF) used the 50-day moving average as a key pivot point (and resistance) from the end of October, all through November, and into December.  When you consider the recent knocking of the sector by Meredith Whitney, these moving averages as real issues start to come more front and center,” Ogg Reports.

“What is interesting in our review here is that while the 50-day moving average is within about 3% to 5% of the current price in most, the chart set-up requires a faster review because this will come up front and center as soon as next week even if the shares suddenly see little price change.  This is because the trend of the 50-day moving average is generally heading lower while the 200-day moving average is heading higher.  To make matters worse, even the 20-day moving averages are all intertwined and in-play as well, and that is in a period where the daily volatility on these major banks and financial institutions is much lower.  Some of these are in a narrowing triangle or flag pattern as well, which is frequently used as a prelude to increased volatility in the near future.   And this is happening in the silly season when trading volume starts to dry up over the holidays and when market participation is generally light,” Ogg Reports.

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Here is a closer look at the 2 Financial ETFs Below:

The investment (FAS) seeks to replicate, net of expenses, 300% of the daily performance of the Russell 1000 Financial Services Index The fund will invest at least 80% of assets in securities that comprise the index. It will also utilize financial instruments that, in combination, provide leveraged and unleveraged exposure to the index. The fund is nondiversified.

TOP 10 HOLDINGS (FAS) ( 250.45% OF TOTAL ASSETS)  
 
Company Symbol % Assets
Aim S/T Inves. Trst Coll N/A 9.37
BK OF AMERICA CP (BAC) 6.3
CITIGROUP INC (C) 2.87
GOLDMAN SACHS GRP (GS) 3.93
Gs Financial Sq Govt Fund N/A 12.59
JP MORGAN CHASE CO (JPM) 7.34
Russ 1000 Finan Indx Swap N/A 177.18
Russ 1000 Finan Indx Swap N/A 22.64
US BANCORP (USB) 2.1
WELLS FARGO & CO NEW (WFC) 6.13

Chart for Direxion Daily Financial Bull 3X Shares (FAS)

The investment (XLF) includes companies from the following industries: banks, diversified financials, insurance and real estate. The fund will normally invest at least 95% of its total assets in common stocks that comprise the relevant Select Sector Index. This fund has adopted a policy that requires it to provide shareholders with at least 60 days notice prior to any significant material change in its policy or its underlying index. It is nondiversified.

TOP 10 HOLDINGS (XLF) ( 56.00% OF TOTAL ASSETS)  
 
Company Symbol % Assets
AMER EXPRESS INC (AXP) 3.1
BK OF AMERICA CP (BAC) 9.43
BANK OF NY MELLON CP (BK) 2.4
CITIGROUP INC (C) 3.99
GOLDMAN SACHS GRP (GS) 6.5
JP MORGAN CHASE CO (JPM) 12.28
MORGAN STANLEY (MS) 3.26
THE TRAVELERS CO (TRV) 2.11
US BANCORP (USB) 3.32
WELLS FARGO & CO NEW (WFC) 9.61

Chart for Financial Select Sector SPDR (XLF)

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