Intraday and Daily Financial XLF Structure

Jan 17, 2009: 3:37 PM CST

Let’s take a moment to look at the intraday action on Friday in the XLF (Financial Sector ETF) and then see how that played out on the daily chart structure – hint… we had a non-confirmation with the US Equity Indexes which you might want to view.

XLF 5-min Chart:

We began the day with a nice-sized up-side gap that was quickly filled without a second thought.  For evidence that the Financials tend to lead the market, the XLF filled the morning gap 3 hours ahead of the DIA and other US Equity Market indexes.

We found temporary support at the gap-fill price and formed an “ABC” Corrective pattern which formed a “Bear Flag” which quickly met and exceeded its ‘measured move’ downside target near $9.70.

From here, price continued its intraday slide into new lows at noon with nary a decent retracement… however the fresh lows formed on a positive momentum divergence that preceded the mid-day reversal into the “Three Push” pattern.

What made Friday’s “Three Push” pattern unique – to me at least – was that the momentum oscillator registered a new high on each new price high – often we see a negative divergence in these cases.  I also drew a trend channel and possible fractal Elliott Wave count for you).

The price pulled back finally to confluence EMA support before closing the session down 3.0% which is a big one-day move.  Let’s see how this played out on the daily structure.

XLF Daily Chart:

As I mentioned previously, it looks like the odds are quite high that we test or perhaps break the November price lows, a development which, if realized, would have bearish overtones for the US Equity Indexes (in that odds would then be overwhelming for them to test/break their lows as well).

The swing from $13 down to $9 occurred with only one up-day for the course of most of January so far.

We broke a rising trendline and failed to break above it on the next test which also met resistance at the falling 50 day EMA.

Again, there doesn’t appear to be any support whatsoever left until we test the sub-$9 per share level to see if buyers will step in to support price here – we’re so close to a test already.

Also, the US Equity Indexes were positive on Friday, while the XLF fell 3.0% which is a searing non-confirmation of the index gains (made on an ‘options expiration’ Friday).

Continue watching the XLF carefully, particularly the swing low at $8.67 and the broader implications should that level fail to hold price soon.

Corey Rosenbloom
Afraid to Trade.com

7 Comments

7 Responses to “Intraday and Daily Financial XLF Structure”

  1. asfd Says:

    “Again, there doesn’t appear to be any support whatsoever left until we test the sub-$9 per share level to see if buyers will step in to support price here – we’re so close to a test already.”

    – untrue- there is support – Zero

  2. Corey Rosenbloom Says:

    Asfd,

    True of course! But I meant support before testing/breaking the Nov lows.
    A test seems inevitable now.

  3. Anonymous Says:

    Corey,
    please comment on this:
    http://elitetrader.com/vb/showthread.php?s=&postid=2264260#post2264260

  4. Corey Rosenbloom Says:

    Anon (and readers)

    The post is about a transaction tax on US Equities labeled the “Day-Trader Tax.”

    I have no comment on that at the moment, as it appears such a far-fetched idea that probably has little traction and will not become law. Enacting it would indeed have devastating consequences but I think we’re a long way from this becoming reality.

  5. Huzar Says:

    Corey,
    what momentum oscillator do you use?

  6. charts and coffee Says:

    Using the Confidence Index as a case for going long HYG and short LQD (or perhaps just looking at HYG long) – http://www.chartsandcoffee.com

  7. Corey Rosenbloom Says:

    Huzar,

    It’s a version of the “3/10 Oscillator” which is basically a MACD with settings 3, 10, 16.

    More on my article “How I setup my Charts