Below is a weekly chart of the Banking Index. Take a good look at the lines
labeled 1 and 2.
What do you see?
Looking at the chart, you should see that the SPY has been trending up since
April 2010, while the Banking Index (symbol: $BKX) has been trending down since
April 2010.
What's wrong with that picture?
What's wrong, is that the Financials component on the S&P 500 is the second
largest component which represented 13.78% of the index.
So, this chart is saying that the "other components" as a group, have been
strong enough to overcome the huge weakness in the Banking sector. Negative
divergences like this cannot go on forever. For the S&P to continue trending
up in the future, the non-financial sectors will have to stay strong, and stay
strong enough for the Financials to start reversing its down trend. So, all
is not roses and there are still some big challenges ahead. (Commentary is
continued below the chart.)
What are the other S&P sectors? See the matrix below ...
Marty Chenard is an Advanced Stock Market Technical Analyst that has developed
his own proprietary analytical tools and stock market models. As a result,
he was out of the market two weeks before the 1987 Crash in the most recent
Bear Market he faxed his Members in March 2000 telling them all to SELL. He
is an advanced technical analyst and not an investment advisor, nor a securities
broker.
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