Ahead of Bank Earnings, Investors Should Approach 'XLF' ETF With Caution

Big banks like Citibank, Wells Fargo, Bank of America and JP Morgan Chase are scheduled to kick off fourth quarter earnings reports for the financial sector next week, but market mavens are mixed on what to expect, warranting caution for investors.

In particular, investors looking to play the Financial Select Sector SPDR (NYSEArca: XLF) have to be wary of its technicals, according to Blue Line Futures President Bill Baruch. The financial sector took a hit in 2018 as evidenced by XLF, which lost 13 percent.

Like many equities in the preceding months, XLF got hit by the volatility cycle to end 2018 as it fell below its 200-day moving average of around $27. Investors looking to buy the dip should tread lightly.

Investors Should Approach Financial ETFs with Caution Ahead of Earnings 1

“I’m very cautious right here with the banks. I think there’s a lot of overhead resistance around the 25 area,” said Baruch on CNBC’s “Trading Nation.”