Contrast the following two Weekly charts of the Nasdaq 100 Index (NDX) and the Financials ETF (XLF).
NDX has made a higher high this year over last year's high and is approaching its July 2011 lows...the rising 50% Fibonacci fan line held as support from its July decline, and the 38.2% line (which was support) is near-term resistance...it has advanced back above the 2007 highs this week.
XLF dropped below the neckline of a rising H&S formation in August of this year...it nearly reached its target of 10.50 before popping up last week and this week. XLF remains range-bound in the mid-2009 zone in between price levels of 13.00ish and 11.00ish.
The 8-day 10-minute percentage comparison chart below of the NDX and the XLF shows that the XLF has led the NDX on a couple of occasions recently on their rally that began on October 4th. The 2-day 2-minute close-up chart shows the switch-over in who was leading who the past two days. The XLF was quite a bit weaker today than the NDX, compared with the action on the first chart...whether or not this is signalling a possible reversal of this latest push up remains to be seen. It's something I'll be watching over the next few days.
It's been my view for quite awhile now, that the Financial sector will have to strengthen and come on board if the equities markets (Dow 30, S&P 500 & Russell 2000) are going to have a convincing advancement beyond their large ranges that they've been in since August.
Also, out of interest, I'll watch China's Financial ETF, (GXC)...It is just below a major resistance level of 65.00, which was support until it dropped below in September, as shown on the Weekly chart below. There was a huge spike up in volume last week (nearly as high as was put in when price broke below the highs in 2007 before beginning a large decline) as price pierced below a support level of 55.00. What price does in between these two levels could have some bearing on the U.S. Financials, so I'll check in on this one from time to time to see where price is going.
