Financial Sector – Weekly Analysis
The Financial sector has delivered roughly 13% since our call at the beginning of June, coming within just 20 basis points of the ideal target. The roadmap has been instrumental in our strategic planning, and today’s update is another analysis worth bookmarking.
In this Financial Sector Technical Analysis, we examine the latest developments across multiple timeframes, assess the sector’s candlestick and momentum structure, and evaluate the Elliott Wave setup at the micro level.
Financials remain one of the key pillars of the broader market, and their next move could carry important implications for the major indices. When the sector begins sending stronger signals, the message often extends well beyond banks and insurers, influencing market breadth, risk appetite, and confidence in the economic cycle.
For members, this report includes the full charts, key levels to watch, and the critical turning points that could define the next phase. Financials are covered under the Strategy package.
New members also have an opportunity to join with a significant introductory discount and follow the sector roadmap from here.
Candles & TA
The Financial sector completed the week with several alerting signals. The weekly candle potentially formed a Spinning Top, while the daily printed a strong Bearish Engulfing on Thursday that was not negated on Friday. As a result, the sector enters next week with predominantly bearish odds on the short- and mid-term frames.
At the same time, the potential 100/200 DMA bullish cross will likely occur next week, while the long-term outlook remains bullish. However, a bullish long-term structure does not mean the sector cannot experience several corrective swings before the next sustained leg higher develops.
Overall, all major trends remain bullish, but the near-term setup has clearly weakened. Financials enter next week with elevated bearish odds on the short and mid term, while the larger bullish structure remains intact.
Elliott Waves – XLF ETF
The mid-term targets remain unchanged. Wave (iii) came very close to the ideal target, and the technicals are now signaling that its terminus point may be near. This development prompted me to zoom in and examine the smaller frames.
As shown on the chart below, the wave advanced briskly in June but faced increasing headwinds throughout July. The technical structure supports the hypothesis that wave v of (iii) has morphed into an Ending Diagonal.
If this interpretation is correct, the sector could experience a sharp correction toward the origin of the diagonal. A 7–8% decline would also align well with Elliott Wave theory and the principle of alternation: wave (ii) was long and shallow, so wave (iv) could be comparatively sharp and deep.
The critical level is $53.19. Wave (iv) must not touch or cross this level, as such a move would invalidate the larger (i–v) impulse developing from the March low.
SUMMARY
XLF remains bullish in the long term, but the short- and mid-term setup has weakened considerably. The sector ended the week with a potential weekly Spinning Top and an unconfirmed daily Bearish Engulfing, raising the odds of a near-term correction despite all major trends remaining bullish.
From an Elliott Wave perspective, wave (iii) appears close to completion, with wave v potentially developing as an Ending Diagonal. If confirmed, that structure could trigger a relatively sharp wave (iv) pullback, potentially in the 7–8% range, which would also fit well with the principle of alternation after the long and shallow wave (ii).
Overall, XLF remains structurally bullish, but the sector may need a meaningful reset before the next sustained leg higher. The critical invalidation level for the larger impulse remains $53.19.
