Financial ETFs outperformed the S&P 500 last year but have cooled a bit so far in 2013 as investors favor more defensive, noncyclical sectors.
In bank stocks, the correction from the mid-March highs looks complete, says Investors Intelligence technical analyst Tarquin Coe.
“The sector is starting to outperform again, an essential ingredient for a healthy bull market,” he wrote in a newsletter Wednesday. “That outperformance is extending the recent uptick by the industry’s relative chart, a move which occurred from the bottom of a bullish expanding continuation pattern.”
Meanwhile, banking stocks are reasserting the rising trend of the past five months, Coe added.
Financial ETF options trading earlier this month hinted some investors were positioning for weakness heading into bank earnings season. [Financial ETF Falters Amid Bearish Bets as Bank Earnings Loom]
SPDR S&P Bank ETF (NYSEArca: KBE) is up 3.9% the past three months, trailing the 6.1% return posted by iShares S&P 500 (NYSEArca: IVV).