XLF Weekly: Grind Back Toward All-Time Highs During Holiday-Shortened Week

Dec. 01, 2019 9:15 AM ETFinancial Select Sector SPDR ETF (XLF)1 Like
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  • Buy-side breakout through last week’s resistance to 30.15s in Monday’s auction.
  • Pullback in Tuesday’s auction to test the breakout is met with buying interest as price discovery higher developed to 30.24s into week’s end.
  • Bullish breadth trending higher.
  • This week’s auction saw price discovery higher to 30.24s, testing the all-time high resistance area.

In this article, we examine the significant weekly order flow and market structure developments driving NYSEARCA:XLF's price action.

The highest probability path for this week, based on market structure, was for price discovery higher. This primary expectation did play out as a buy-side breakout above last week's high developed early in the week. Buying interest emerged on the pullback/re-test of the breakout before price discovery higher continued to 30.24s ahead of Friday's close, settling at 30.15s, near all-time highs.

25-29 November 2019:

This week's auction saw a buy-side breakout in Monday's auction as last week's late buyers held the auction. Price discovery higher developed, achieving a stopping point 30.15s. Buyers trapped there, developing balance, 30.01s-30.13s, as buying interest emerged into Monday's close. Monday's late buyers failed to hold the auction as retracement developed in Tuesday's trade to 29.93s, testing the buy-side breakout area. Sellers trapped, 29.96s, as structural buy excess developed there, and the breakout held. Minor rotation higher developed to 30.09s as buying interest emerged, 30.02s-30.09s, into Tuesday's close.

Tuesday's late buyers held the auction as constricted price discovery higher developed in Wednesday's trade, achieving a stopping point, 30.21s. Buying interest emerged, 30.19s-30.20s, into Wednesday's close ahead of Thursday's holiday. A minor probe higher developed in early in Friday's trade, achieving the weekly stopping point high, 30.24s, at/near all-time highs. Buyers trapped, 30.23s, as sell excess developed, halting the buy-side sequence. Minor price discovery lower developed to 30.09s ahead of Friday's close, settling at 30.15s.

XLF Weekly 29Nov19

This week's auction saw buy-side breakout from last week's resistance before minor price discovery higher developed toward all-time highs. Within the broader context, price discovery higher continues following the buy-side breakout above prior key intermediate resistance, 28.70s.

Looking ahead, the focus into next week's auction will center upon market response to this key supply, 30s-30.33s, at all-time highs. Sell-side failure to drive price lower back through this area will result in price discovery higher to new all time-highs. Alternatively, buy-side failure at this area will target key demand clusters below, 29.70s-29.45s/28.70s-28.50s, respectively. The highest probability path near-term based on market structure is for price discovery higher. The larger intermediate-term bias (3-6 month) is buy-side above barring failure of 28.72s as support.

It is worth noting that breadth based on the S&P Financial Sector Bullish Percent Index sees the trend higher continuing. Stocks more broadly, as viewed via the NYSE, are also now seeing a similar posture. Asymmetric opportunity develops when the market exhibits extreme bullish or bearish breadth with structural confirmation. As the broad market and financials' breadth is bullish, potential for price discovery higher continues. Breadth and sentiment can remain extreme for prolonged periods, and thus financials remain bullish until market structure and breadth both confirm a potential for reversal.

XLF Breadth 29Nov19

The market structure, order flow, and breadth posture will provide the empirical evidence needed to observe where asymmetric opportunity resides.

This article was written by

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Historical Data Mining & Visualization for NYMEX energy markets. Our experience derives from the proprietary trading world involved in US Index derivatives, commodity ETF derivatives, and exchange-traded NYMEX WTI derivatives.Futures trading contains substantial risk and is not for every investor. An investor could potentially lose all or more than the initial investment. Risk capital is money that can be lost without jeopardizing ones financial security or life style. Only risk capital should be used for trading and only those with sufficient risk capital should consider trading. Past performance is not necessarily indicative of future results.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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