PreMarket Prep: Charting The Financial Sector's Rebound

While many sectors have distanced themselves from recent lows, there have been some laggards. One of those sectors has been the financial sector S&P Select Financial SPDR Fund (NYSE: XLF).

During Wednesday’s "PreMarket Prep" broadcast, Greg Harmon, the founder of Dragonfly Capital Management, identified the sector as one that has some potential to join the rally. 

Retreat From All-Time High: Just as the S&P 500 index made its all-time high in January, so did the XLF at $41.70. It traded lower in four of the next five months ending in June. Finally, it made a tradeable low just under the June low ($30.58) at $30.37 and began to rebound.

It posted its high for the rebound on Monday at $34.05 and the closing high for the rebound on Tuesday at $33.84.

Harmon’s Take: In many instances, laggards are laggards for a reason. However, if investors can catch a turn in price and or sentiment, it can be very rewarding. Harmon was asked to identify sectors that have underperformed in the recent rally.

Harmon named the financial sector.

"One lagging sector that may be creating all of this negative sentiment in the market is the financials,” he said. “They are still well behind, but are starting to turn around.”

Harmon referenced the weekly chart.

“It bounced right where it should have, at its 200-week moving average, which is a 38.2% retracement from the pandemic low to the all-time high, but has been much slower to rebound.”

XLF Price Action: The ETF's higher opening print ($34.36 vs. $33.84) has turned out to be the dead low for the session. As of 1:45 p.m. EST, the high for the session stands at $34.73. That high comes in between its June 8 ($35.07) and June 9 ($34.60) highs. 

If the issue can end the session above $34.62, it will be its highest close over the last 45 sessions.

The discussion on the issue from Wednesday’show can be found here: The entire interview with Harmon begins at the 35 minute 15 second mark.