Most are important. But every now and then, one stands out from the rest.
This is one of those charts.
I'm talking about Financials.
Banks, lenders, payment companies, and financial institutions sit at the center of the economy.
Credit is the fuel that keeps the system moving, which is why I always pay attention to what this group is doing.
Right now, Financials $XLF are putting on a failed breakdown relative to the S&P 500 from a level that has historically marked major turning points.
Take a look at the chart:
The last two times this ratio traded near current levels — around the GFC lows and the post-Covid lows — Financials went on to become one of the market's leadership groups.
Think about what that means for a second.
We're talking about some of the largest and most influential companies in the world: JPMorgan Chase, Goldman Sachs, Visa, Mastercard, Bank of America, and many others.
When this group starts outperforming, it's usually telling us something important about investors' willingness to embrace risk and the overall health of the market.
If there's a level where Financials can reclaim leadership once again, this is it.
And that's exactly why I've been spending so much time focused on the group lately.
In fact, we've been adding exposure in our Wave Trader portfolio.
On Friday, we bought call options on Visa $V, and the position has already doubled in value.
To show you exactly how we're thinking about these opportunities, we've unlocked the original trade write-up and analysis for informational purposes so you can follow our process step by step.
If you're interested in joining us at Wave Trader and getting access to future trade ideas, you can learn more here.
