$$ Weekly Financials Report

Jan 19-22, 2010
For the annotated chart of $XLF, please go here.

XLF

Price closed down 28 cents for the week at $14.94, right on the top border of the neutral zone and well above the main trend line on price (~$14.10). I have drawn a dashed line indicating an old positive reversal trend line on price. While that trend line was violated, it still may serve as support.

Momentum: The picture of a solid uptrend. The RSI has obeyed up trend range rules (38+). We have seen positive reversals at rising bottoms and bearish divergence at tops, both of which are hallmarks of up trends. Finally, we recently saw trend acceleration to the upside when an old bear divergence resistance line was broken.

Volume: Rising short and medium term accumulation.

Volatility: Average. Std Deviation hugs its 125-day average, and ADX has crossed above 20. No squeeze play on.

Last Week's Outlook: XLF seems to have broken out of its consolidation pattern powered by increased volatility, strong accumulation, and trend acceleration after breaking old bear divergence resistance in the RSI. I expect XLF to exceed its outer Keltner Channel soon. If it does, look to take profits when new bearish divergence develops between price and momentum.

Next Week's Outlook: Generally bullish. Should price break to new highs, expect resistance at ~$16.50. Price double bottomed at that level in 2002, and $16.50 served as bottom-top resistance in the 2008 downtrend.