Bank ETF Charts Point to More Upside

U.S. stocks have started this week in glum fashion, but two down days do not mean investors should be rushing for the sidelines.

In fact, some sector exchange traded funds are telling investors the time is now to get involved with once moribund financial services ETFs high on that list. The Financial Select Sector SPDR (NYSEArca: XLF), the largest financial services ETF, came into Monday as the fourth-best of the nine sector SPDRs in the fourth quarter. [Getting Bullish on Bank ETFs]

XLF is starting to increase its pace of out-performance relative to benchmark indexes. Over the past month, the ETF is up 2.4%, more than double the S&P 500’s gain over the same period. Importantly, measuring XLF against the S&P 500 shows the financials ETF is starting to gain strength and could be nearing a breakout against the benchmark U.S. index, notes Josh Brown on The Kindergarten.

We see XLF’s new price high as the market telling us that strong hands want to own financials in a market where many stocks have not been able to make new highs. We recommend listening to the market and buying financials given their improving relative profile,” said Brown.

Add to that, some of XLF’s marquee constituents are strengthening.

“Even the much-maligned Citigroup (NYSE: C) is now outperforming the broad market,” reports Michael Kahn for Barron’s. Kahn also notes that Dow component J.P. Morgan Chase (NYSE: JPM) “offers a textbook illustration of a breakaway gap with both strong price action and heavy volume.”