It's chart voo-doo time. Let's look at the Fibonacci retracements that have occurred on the XLF since the March 9th low. There have been 3 fairly classic 23.6% retracements and each time the sector index has recovered nicely to achieve a new high. Now we are at the 4th successive 23.6% retracement, which of course is deeper than the others. Will it hold, or are we due for a more precipitous drop?
First bounce off the March 9th low was solid although we heard all the calls of the "dead-cat" bounce. Remember this was precipitated by Citigroup stating that they have been profitable for the first quarter.
Now we are at the fourth retracement since March 9th and the XLF is at the 23.6% retracement. We have done a lot of work to get this far with almost 50% appreciation of the sector. Big news from Citi and a huge injection by the Fed this week helped the burst. With Friday options expiry coming into the weekend, I would expect a pull back to 50% Fib, which would also coincide with the 50 dMA at 8.25.