Long

XLF To Rally

Updated

XLF normally moves quite slowly, but we may may be at a moment in which that accelerates substantially, even improving on what has been a phenomenal year.

Weekly -

Daily -

The EW path drawn is what may be expected most commonly - we're looking for that or better.

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I want to add a little bit of context to this trade idea... #1 I do think we are likely entering the 5th wave in the indexes, not just XLF... here you can see RTY and Dow having completed complex Elevated Irregular Flats in Elliot Wave parlance.

Fundamentally (I wish it would let me paste the images) we are basically getting a third Zweig Breadth Thrust, we just made a massive turn to oversold and back again (80-80-80 Signal), and historically we rebound very well 80% of the time after a down month when Dec, Jan, and Feb were positive (Turn of the Year Hat Trick)...

So I have some reasonable confidence this is going to work out... and if I'm right about going into a 5th wave I think XLF options will pay better than everything except for maybe SMH calls.

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Here is the XLF / Spy spread - if this ends up trending impulsively to the upside then we'll know we're in the right place.

And here's a 5 minute chart. The pink and purple 1-2s could also be an ABC and we're starting the rally with a leading diagonal (just like the spread chart), and that goes for all of the indexes as well... it's normal but we could have a bit of chop before we really get going if that's the case. Will update soon - but we'll know if we end up getting a 4th wave to 50% before we reach the 138%.

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Try again - here is the spread chart :-D

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Until this spread gains some traction, XLG won't be outpacing the market. If it is a leading diagonal as labelled then it will hopefully stay over the 50% retracement then it has a shot at establishing itself.

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As semis are leading the market, I definitely like SMH holding 38% for a 4th wave here.

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Whoops posted as a comment lol

Here's an update, possible 1-2 1-2, possible diagonal and or worst case it is just an abc up (not labelled)- which seems unlikely unless Friday's rally is a headfake... TBD :-D

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XLK looking similar to SMH, holding a 4th wave fib at 50%... if it stays above that this chart could have the clearest targets with fibs lined up at the top of the channel.

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And lastly XLF did outpace SPY on Friday which is a great sign for this trade - if everything holds Friday's low we should be headed higher.

Trade closed: target reached

Unfortunately, the reaction to this most recent decline is not bullish, and the wave short term structure in SMH confirms this. This leads me to believe a selloff is imminent. A selloff here confirms the break of our long term trend line... which could mean we are getting the last 4th wave in the longer term impulse and near to a top.

Wow, on further examination I have a high degree of confidence XLF is going to follow this fractal directly lower.

FuturesIntelTM

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