The banks were again quite strong, never mind the insurers. Combined they are in this index. Maybe we are there as well?
XFN
XFN Capped Financial ETF update HFD
These charts are both from the ticker XFN, however, the Sharp chart uses the Index Fund whereas all other charting services use the Index pure and simple. It is, I believe a consequence of using a total return and a price only concept interchangeable. This causes the chart on the left to slope upwards and the Reuters chart on the right to slope downwards. The Big chart and the Globe and Mail do the same thing, that is slope downwards;
Whatever, in any event from all three charts it is clear that the Capped Financials (that includes insurers!) could be right on the precipice of their own little cliff. The EW count as well as a Head and Shoulder pattern indicate that as in the Dow Jones a turn could actually occur just about any moment now. Also these charts explain why this market has been so intensely irritating for both bulls and bears. With the exception of the first 6 months or so following the lows of March 2009, the financials as a group (without cap. weighting) have accomplished absolutely nothing for the last 3 and 1/2 years. If change is going to occur imminently , and to the downside, you may want to look at the HFD ETF;
This is , of course, the Horizons Capped Financial Down ETF and basically the inverse of the one above even though that is hard to tell from the chart – these ETFs do not track well. The low Friday was at $5.97 and it comes from near $60. Good luck!
XFN , capped financials ETF
Every quarter Canadians wait breathlessly for another round of “earnings season” for the banks and , in a broader sense, the financials. Every miniscule move, up or down , is met with a barrage of analysis that is essentially a waste of time as the banks will always be able to extract what is needed to continue to perform. The only exception is when they are blind sighted and do not see “IT” coming. The next such event, they come up like clockwork every so many years, should be just around the corner. We use the XFN as it provides a nice cross section of the industry (but RY or BNS are pretty well identical);
In the big picture we are still looking for a very large A-B-C and are constantly amazed how high the counter trends manage to take it back up. But the pattern is sufficiently clear (so clear that we anticipated a few of these moves!). It is a series of 1-2’s and given the action in the RSI and MACD wave 3 down could start literally any moment now. Of course we have no idea what “it” might be this time but it would not be all that hard to point to certain developments that could upset the apple cart seriously.
XFN , XLF, RY and other Canadian Banks.
XFN and the XLF are, of course, the Canadian capped financial ETF and the S&P’s counterpart for the US. All but one of the Canadian banks have reported their latest quarter earnings and for banks worldwide, they got a pretty good boost from the coordinated global central bank commitment to ease swap pricing even if it is not clear what will come out of that. In any case good time to review the banks. To start the XFN and XLF;
The message from these virtually identical charts is that a 5 wave down sequence was complete and some sort of complex a-b-c correction has been going on for the past month or two and is not yet complete. Basically both could attempt to get back to the 200 day moving average (the red line) but they certainly do not have to go that far!
How this fits with the Royal is clear from the chart;
A move to about $50 to $53 seems to be in the cards. As the buy was recommended at about $43.50 one would theoretically be up $5 already. It was not always possible to get a good fill as the stock gapped twice in the last week. Whatever, a 10% gain is in the cards and I would suggest to take it.
The Royal and the others, except BMO that still has to report, demonstrated their dependence on the nickel and dime business which is little more than an oligopoly rent. Generally, despite new records, particularly in insurance, the old mainstays of proprietary trading and M&A, together with new issuance, were disappointing. Overall the banks are overvalued.