Financials Outperforming Though Deteriorating Technically

With the major equity market ETFs down about 1.0% to 1.5% this morning, the Financial Select Sector ETF (NYSE: XLF) acts slightly better. One look at the enclosed daily chart of the XLF and we notice that today's weakness has not (yet) inflicted meaningful damage to the July-August uptrend (10.83 to 14.69). In fact, early weakness pressed the XLF towards a test of key near term support at 14.40, but 14.46 contained the selling pressure, which has given way to buying that has returned the price structure to 14.60/63. As long as 14.40 remains viable support, the XLF will retain its bull trend (higher-highs and higher-lows). And although we notice that daily momentum (RSI) is not confirming the late-August high, which is a big warning signal to holders of long positions, unless and until price breaks and sustains key support (14.40), I have to view the overall technical situation as positive-- but deteriorating. That said, we should not be surprised to see the XLF climb to 15.00-15.30 prior to a meaningful price peak. MJP 8/31/09 11:30 AM ET (14.64)