{"id":14513,"date":"2025-02-01T00:01:47","date_gmt":"2025-02-01T00:01:47","guid":{"rendered":"https:\/\/businesstriumphs.com\/index.php\/2025\/02\/01\/xlfs-record-highs-buy-the-dip-or-bail-out-now\/"},"modified":"2025-02-01T00:01:47","modified_gmt":"2025-02-01T00:01:47","slug":"xlfs-record-highs-buy-the-dip-or-bail-out-now","status":"publish","type":"post","link":"https:\/\/businesstriumphs.com\/index.php\/2025\/02\/01\/xlfs-record-highs-buy-the-dip-or-bail-out-now\/","title":{"rendered":"XLF\u2019s Record Highs: Buy the Dip or Bail Out Now?"},"content":{"rendered":"
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As the FOMC prepared to announce its rate decision on Wednesday, the Financial Select Sector SPDR Fund<\/strong> (XLF), which had been steadily climbing since the end of 2023, was approaching a new record high. Moreover, the Fed\u2019s decision held little surprise \u2014 its stance had been well-telegraphed in the weeks leading up to the announcement. Wall Street widely expected rates to remain unchanged.<\/p>\n

Yet, as Jerome Powell spoke following the FOMC decision, XLF and the rest of the stock market declined. At the end of the day, XLF notched a gain, but one that barely scratched above its opening price.<\/p>\n

In after-hours trading the next day, XLF quietly broke into all-time high territory, surpassing $51.40. Some investors might be asking whether they should have bought XLF at the breakout. To answer that, let\u2019s start with a weekly chart<\/a> to gain a broader perspective on XLF\u2019s trajectory.<\/span><\/p>\n<\/p>\n

FIGURE 1. WEEKLY CHART OF XLF.\u00a0 Note how XLF has been trending steadily since late 2023. Chart source: StockCharts.com. For educational purposes.<\/span><\/p>\n

XLF remained rangebound between just under $29 and $36 for almost a year and a half. During that period, it experienced two failed breakout attempts to the upside, followed by a lackluster retest. By the time XLF cleared the upper levels of the trading range (see blue dotted lines),\u00a0 more than 90% of S&P financial stocks were trading above their 200-period exponential moving average, as seen by the indicator in the bottom panel.<\/p>\n

Let\u2019s pause for a moment and discuss this indicator, which you can add this to your indicator window by selecting Price and typing in (!GT200XLF)<\/strong>. This is a useful breadth indicator that tells you the percentage of stocks above a given moving average \u2014 in this case, the 200-period EMA. With more than 90% of S&P financial stocks trading above the 200-period EMA, the signal indicated a bullish level of internal strength that might have supported the case for buying the breakout when it finally occurred (see magenta rectangle).<\/p>\n

Backup \u2014 Let\u2019s Break Down XLF: The financial sector includes<\/em><\/strong> several industries. Since we\u2019re discussing XLF, it\u2019s important to mention that over 96% of the ETF is comprised of Financial Services, with the largest weighting going to bank stocks.<\/em><\/p>\n

XLF rallied from the end of 2023 to the last months of 2024. After a brief pullback in the last two months of the year, XLF resumed its climb to its current levels.<\/p>\n

Now let\u2019s shift over to a daily chart<\/a>.<\/span><\/p>\n<\/p>\n

FIGURE 2. DAILY CHART OF XLF. Will the index pull back or continue advancing into record-high territory?<\/span>Chart source: StockCharts.com. For educational purposes.<\/span><\/em><\/p>\n

XLF\u2019s technical strength has been net bullish over the entire period represented on the chart, as seen by the StockCharts Technical Rank<\/a> (SCTR) reading displayed in the top panel.<\/span><\/p>\n

The Money Flow Index<\/a> (MFI), which considers momentum and volume, indicates that buying pressure is steady while remaining below overbought conditions. This signals that XLF is not topping out. <\/span>However, the candles over the last few sessions also show that conviction on either side of the fence, bullish or bearish, remains low. There\u2019s a possibility of a stall or pullback, and if either materializes, you can expect a reversion to the middle Bollinger Band<\/a>, which might also serve as a sound entry point should the fundamental context remain favorable (note how the price action over the last six months seems to have responded well to Bollinger Band levels).<\/span><\/p>\n

At the Close<\/h2>\n

Add XLF to your <\/strong>ChartLists<\/strong><\/a> <\/strong>and watch the levels discussed above. If you somehow bought the initial breakout, which didn\u2019t show much bullish conviction, look to the middle Bollinger Band as a potential support level. A close below $47, the most recent swing low, would invalidate the current rally.<\/p>\n<\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

As the FOMC prepared to announce its rate decision on Wednesday, the Financial Select Sector SPDR Fund (XLF), which had been steadily climbing since the end of 2023, was approaching a new record high. Moreover, the Fed\u2019s decision held little surprise \u2014 its stance had been well-telegraphed in the weeks leading up to the announcement. […]<\/p>\n","protected":false},"author":0,"featured_media":14514,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[2],"tags":[],"class_list":["post-14513","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-stock"],"_links":{"self":[{"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/posts\/14513","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"replies":[{"embeddable":true,"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/comments?post=14513"}],"version-history":[{"count":0,"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/posts\/14513\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/media\/14514"}],"wp:attachment":[{"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/media?parent=14513"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/categories?post=14513"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/tags?post=14513"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}