The Financial Select Sector SPDR (NYSEArca: XLF), the largest U.S. sector ETF, is up half a percent in the current quarter, but the niceties could end there for XLF and rival bank ETFs.
XLF is locked in a dubious tie with the Consumer Discretionary Select Sector SPDR (NYSEArca: XLY) as the worst-performing sector SPDR this quarter. The Vanguard Financials ETF (NYSEArca: VFH) has been even worse with a second-quarter gain of just 0.2%.
The expectation of higher interest rates that have yet to materialize and investors favoring value sectors such as energy and industrials have been among the problems plaguing bank stocks and ETFs this year. Disappointing dividend news from Citigroup (NYSE: C) and Bank of America (NYSE: BAC) has not helped matters for XLF and friends. [Bank ETFs Deal With BofA’s Bad News]
Major bank ETFs are still clinging to important uptrends, but that technical situation merits near-term scrutiny.
“At this time the trend in banks is UP, as they are above key long-term moving averages and support lines. Noting bearish has taken place in this sector so far,” said Chris Kimbe of Kimble Charting Solutions. “I am keeping my eyes on the patterns banks have formed since the first of the year though. Both the Bank Index (BKX) and Regional Banks ETF (KRE). May be forming a head & shoulders topping pattern with a bearish wick taking place this past week at the potential right shoulder.”
KRE is the SPDR S&P Regional Banking ETF (NYSEArca: KRE). BKW is the KBW Bank Index, the underlying index for the PowerShares KBW Bank Portfolio (NYSEArca: KBWB).