The financial sector is on many investors radar, as the lows seen last year have to get better. What does the recent performance of the biggest financial exchange traded fund(ETF) indicate about the health of the sector?

The ETF Financial Select Sector SPDR (NYSEArca: XLF) indicates a financial rally of some sort, as the ETF set a new 52-week high of $15.97 a share on Wednesday. One year ago on March 17, 2009, the fund touched a session low of $7.87, reports Market Pulse for MarketWatch. [Financial ETFs Struggling, but Improving.]

Meanwhile, insurance shares are leading with their performance, along with the good financial news. John Spence for MarketWatch reports that SPDR KBW Insurance ETF (NYSEArca: KIE) is one of the top financial sector performers year-to-date, up 15.3%. Select insurance companies are going to pay back their share of the TARP funds that were given by the government. [Why Regional Banks May Be Worth a Look.]

Traders are still wary of risks, however, and they know that they are not out of the woods yet, as far as the financial sector is concerned. Gary Gordon for ETF Expert says that for the year term, he is watching the U.S. dollar, and if it rapidly appreciates or rapidly depreciates, I would worry about equities for 2010.

By taking the time to figure out your investment strategy and goals, it will be natural to use a strategy such as the 200-day moving average for timing your market moves. By trend following and watching the trend lines you can eliminate any of the guesswork and mitigate risk.

For more stories about financials, visit our financial category.

  • Financial Select Sector SPDR (NYSEArca: XLF)
  • Vanguard Financials (NYSEArca: VFH)
  • iShares Dow Jones U.S. Financial Sector (NYSEArca: IYF)
  • SPDR KBW Insurance ETF (NYSEArca: KIE)

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.

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