At the beginning of the year, many analysts were pointing to the June meeting as the one where the Fed might raise rates.
Those expectations have changed, and now most people are saying that the September meeting is the earliest we will see a change in rates.
While most sectors aren’t looking forward to a rate hike, the financial sector would likely benefit from a hike.
When rates rise, banks benefit from a larger spread between the loan rates they collect and the savings rates they pay out.
If the Fed makes any indication that a rate hike is coming sooner than most think, the XLF should rally.
However, if the Fed indicates that a rate hike is even further away than most people are thinking, the XLF would likely fall.
My recommendation for now is to watch the chart to see which gives way first.
If the XLF can break solidly above the $25 level after the Fed meeting, it could be primed for a great second half of the year.
If the XLF breaks below the upward sloped trendline after the Fed meeting, it could very easily drop down to challenge the 52-week moving average and possibly break below it.
The bottom line is I wouldn’t make a move in the next few days. I would wait until the end of the week or even next week to play the XLF.
If the resistance gives way, I would go long, and if the trendline gives way, I would make a bearish play.
This article is brought to you courtesy of Rick Pendergraft from Wyatt Research.