The Financial Select SPDR fund (XLF) will be in the spotlight over the next two weeks, as some of its biggest holdings report second-quarter earnings numbers. The charts indicate the ETF could be nearing a substantial breakout attempt. In total, 26 XLF components will release numbers by next Friday.
Banks represent 26% of the XLF, which is a lot. However, that means that three quarters of the index is comprised of financial institutions that are not banks. The ETF is comprised of five industries: financial services (33%), banks (26%) capital markets (21%), insurance (16%) and consumer finance (4%).
The financial sector, in aggregate, is the second biggest sector in the S & P 500 with a 12% weighting. That pales in comparison to technology (33%), but if the financials aren't doing well, it typically isn't positive for the market or the economy. Over the last year, XLF has been doing well (+32% from the October '23 lows), but it's underperformed in 2024 so far: XLF +10.
6% vs. S & P 500 +17%. All that being said, from a technical perspective, XLF is sporting bullish formations across three different time frames.
Daily Bullish Pattern First, here's the daily chart. XLF was the best-performing sector ETF on Tuesday, July 9, which pulled it close to the neckline of this potential bullish inverse head & shoulders pattern. Just a few weeks ago, in early May, XLF broke out from a similar-looking formation.
While the ETF saw immediate upside follow through for two weeks back then, it f.
