Trading By the Numbers: 3 Financial ETFs Ready to Fall

With sellers starting to overtake buyers in Thursday’s trading session, further short term weakness in financials should be of no surprise to any trader or investor who has seen many of the stocks in this sector make significant moves higher in recent days.

Strength in financials has been especially evident in financial ETFs like the Financial Select SPDRS ETF (XLF) and the iShares Dow Jones U.S. Financial Sector Index Fund ETF (IYF), both up more than 8% over the week heading into Thursday’s trading. Trading in bear market territory since June, these ETFs spent three days at overbought levels before succumbing to selling on Thursday, with XLF off by more than 2% late in trading and ILF down about 1%.

Given the recent rallies in these exchange-traded funds, traders and investors should be prepared for the potential of additional selling beyond Thursday. While XLF has returned to neutral territory, shares of IAU still are trading just below overbought levels and both funds remain among our lowest rated heading into trading on Friday.

Another financial exchange-traded fund for traders and active investors to keep an eye on is the 3x leveraged Direxion Financial Bear 3x Shares (FAZ). Should sellers continue to pressure financials lower, higher prices in the FAZ – among our higher rated ETFs heading into Thursday’s session – would be all but assured.

The exchange-traded funds in today’s report were drawn from the data and research available through PowerRatings. To find out more, click here.

David Penn is Editor in Chief of