Chart of the Day - Friday, July 5th, 2019

Today's chart of the day was shared in an article titled "Knee High by the Fourth of July" by Shane Murphy (@murphycharts). It's a weekly ratio chart of the Financial Sector ($XLF) relative to the S&P 500 ($SPY). In the article, Shane notes that Financials were the best performing sector in Q2. He adds; "I consider this evidence that the recent move to all-time highs may prove to be sustainable in the long run. If  stocks are going higher, we want to see financials participating." Despite the recent strength from Financials, they're still underperforming the S&P 500 on a longer time horizon, as shown by this chart. However, Shane brings our attention to the bullish RSI divergence as a sign that the downtrend may reverse soon, meaning Financials will outperform the S&P 500. Leadership from this sector would not only be a positive for the broader market, but it would also give a boost to the small-cap Russel 2000 index, as it is heavily weighted towards Financials.