Financial Select Sector SPDR (NYSEArca: XLF) surged in May to help power the S&P 500 to new all-time highs but the financial ETF is trailing the market in June as a leader turns laggard.
XLF is worth keeping an eye on because the performance of banking stocks is a helpful indicator of risk appetite in the market.
The financial ETF is still ahead of the S&P 500 year to date despite lagging the index so far in June. XLF is up 15.4% so far this year, compared with a gain of 11.4% for iShares Core S&P 500 ETF (NYSEArca: IVV).
Investors Intelligence technical analyst notes XLF is reversing this month after several attempts to break through $20 a share.
Aside from being a round number, it is also a milestone retracement level of the 2007-2009 bear market. The $19.80 mark for XLF is a 50% retracement of that whole slide, the analyst said.
The top five holdings in the financial sector ETF are Berkshire Hathaway (NYSE: BRK-B), Wells Fargo (NYSE: WFC), JP Morgan (NYSE: JPM), Citigroup (NYSE: C) and Bank of America (NYSE: BAC).
“On a relative basis, versus the S&500, despite staging a rally since the end of 2011, it is still short of its high from 2009. That creates a bearish relative divergence given that the price has already broken way above its 2009 high. So over the long-term, financials are not performing as well as many would make out,” Coe wrote in a newsletter. “The XLF has underperformed since the end of May and we expect that to continue given the vulnerable charts belonging to the fund’s components.”
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