By: Alex Rosenberg | CNBC Producer
"The reality is that financials, which are the biggest part of the
market in many ways, and the second-biggest weight—they don't act well,"
Oppenheimer's chief market technician, Carter Worth, said. The sector
"has been underperforming for five months, and that's a problem."
While the S&P 500 has risen 7.6 percent in the past five months, the SPDR Financial ETF (XLF) has only risen 3.8 percent. And even as the market continues to make all-time highs, key financial stocks like JPMorgan, Bank of America and Berkshire Hathaway haven't made fresh 52-week highs since July.
So are the financials predicting a turnover for the market as a whole?
While the S&P 500 has risen 7.6 percent in the past five months, the SPDR Financial ETF (XLF) has only risen 3.8 percent. And even as the market continues to make all-time highs, key financial stocks like JPMorgan, Bank of America and Berkshire Hathaway haven't made fresh 52-week highs since July.
So are the financials predicting a turnover for the market as a whole?
Worth looked back 25 years to find every
instance in which financials have underperformed the market for more
than five consecutive months while the market itself was "in a bullish
phase" (meaning, while the S&P was 5 percent or higher above its
150-day moving average) as it is now.
He found that in the 30 situations that fit both criteria, the market tended to drop 0.53 percent in the ensuing two-months.Now, a decline of half a percent might not sound terrible, But it is much worse than the average two-month return of 1.23 percent. The underperformance in the financials, then, provides Worth another reason why "we remain sellers."
Dan Nathan of RiskReversal.com agrees with Worth's bearish take.
"As we get toward the end, possibly, of QE, and maybe a hint to it sometime in December, we could have some trouble in the markets," Nathan said on Friday's "Options Action." "And maybe the financials are telling us that."
He found that in the 30 situations that fit both criteria, the market tended to drop 0.53 percent in the ensuing two-months.Now, a decline of half a percent might not sound terrible, But it is much worse than the average two-month return of 1.23 percent. The underperformance in the financials, then, provides Worth another reason why "we remain sellers."
Dan Nathan of RiskReversal.com agrees with Worth's bearish take.
"As we get toward the end, possibly, of QE, and maybe a hint to it sometime in December, we could have some trouble in the markets," Nathan said on Friday's "Options Action." "And maybe the financials are telling us that."
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