Based on a monthly chart, I believe that the financial sector ETF, symbol: XLF, has reached a bottom. We are at horizontal support back in October of 2005 at $28.78. This is exactly, to the cent, where the 50% pullback is from the lows of the beginning of the rally in the financial sector April 2003 to its highs in May 2007. This is also where it meets trend line support from the lows of May 2004 to the lows of October 2004.

The weekly RSI is diverging, pointing to a rally! The Monthly RSI is at oversold levels way back in 2002 when the rally in the financial sector first bottom out from the bear market that ensued in 2000! This is awesome! I have took a position based on the divergence and will keep a close watch in this sector’s RSI, waiting for it to break the weekly downward RSI trend line.

The CCI 14 and 6 is also giving a counter-trend pattern called “Hook From Extreme,” but it has not broke the downward sloping trend line yet although the 6 has already crossed over the 14.

I am still holding on to SPY and other index ETFs. I left Yahoo last month when the divergence did not work out. I find myself mainly holding ETFs with a big smile of satisfaction.