Today's weakness in the Financial Select Sector SPDR (XLF) has pressed the financial ETF below all of my relevant "trading" moving averages, which I consider to be a sign of impending decline. However, let's notice that the price structure must break both its 1-year support line as well as its prior pivot low, which reside at 35.53, in order to trigger downside acceleration towards a test of the next important, intermediate-term pivot low, at 34.18 (from 3/14). Indeed, many of its top 20 components -- Citigroup (NYSE: C), Bank of America (NYSE: BAC), AIG, JPM, WFC, WB, GS, MER -- look toppy and vulnerable to forthcoming price pressures, perhaps precipitated by periodic, but very damaging news that mortgage lending and trading businesses have resulted in deep losses for many more financial institutions than had previously been known or expected. Be that as it may, the technicals are encouraging me to get short for a move into the 34 area next.



Mike Paulenoff is a 26-year veteran of the financial markets and author of MPTrader.com, a real-time diary of his technical chart analysis and trading alerts on all major markets. For more of Mike Paulenoff, sign up for a free 15-Day trial to his MPTrader Diary by clicking here.