A look at how the financial sector is faring helps to put the larger market picture in perspective.
We continue to believe that tech and financials are prime movers in bull markets and if these falter or lag other sectors then we should be suspicious of the markets' true strength.
Looking at the XLF component model demonstrates the financials relative resilience over the past year although we also note that if no stops had been exercised there was virtually no gain (or loss) between years one and two. The metrics provided DO NOT reflect the use of any of the recommended stops since these are really discretionary on the part of the user, but the dramatic rollover of the P6 line for a top 2 sort in the last week of May was a clear signal to cash out.
On the 4 month chart the P6 is now dead on the RSQ longer term support line and in the past this threshold has always been penetrated downward....another cautionary canary in the mineshaft of possible market troubles ahead.
Although the financials have outperformed the SPY on a component basis their momentum is currently on a fade. A top 6 sort of this model provides considerably better metrics, which we will examine tomorrow.