I will begin this post by saying I am glad to be back. I will not bore you with the details at present, as it is sufficient to say: they are none of your business. Perhaps later, once I have finished I will share my reflections on this difficult period in my life.

Now on to look at the financials, specifically the sector ETF XLF.

There are several different scenario’s, and therefore trades, that could play out given this chart and the overall state of the market.

1) Long trade: A complex, 5 point correction.
The 5th point would be on the trendline capping the upside of XLF, and a break from there could send the banks to multi-year highs. This is not a probable scenario in my view, and we would first need to see a bounce off the combination of support from early February (the red line) and the up-trend line at around 14.40. I am looking for the XLF to find some support here, however temporary, in the next day or two. It is worth noting, when considering longs that there are mixed technical indicators here. The stochastic are oversold, but the 50dma is also starting to roll over and downward sloping now.

2) Short trade: Breakdown of complex correction
This is the more likely scenario in my view given the internals of the market, and macro economic conditions. The trade is simple: short around the break of the early February support line with a target of the 200dma (which coincides with a 50% retrace of the up-move) and is about a 5%er. I would wait a day or two after a break of 14.40 to confirm the direction, as we could see a flush out followed by a bounce at these levels.

Looking at the weekly picture however, I do recognize that a short will likely be a short stay (pun intended) because it appears to my armature eye that we are still in the correction phase of a bull market and the bears have some more work to do to really rip the banks down.

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