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Financials are broadening but leadership is not fully confirmed

by Sentimentrader
2026-07-02
A trend-score model shows the S&P 500 Financial sector expanding in absolute strength and momentum, though relative leadership remains unconfirmed. Historical data suggests a patient, longer-term horizon is required before the group earns a major seat at the table.

Key points:

  • Financials led all sectors in the percentage of S&P 500 stocks with a 10-day relative strength range rank above 80%.
  • The sector ranked just behind Technology in the share of stocks with both absolute and relative trend scores above 8.
  • XLF's own TrendScore improved to 8, but its relative TrendScore versus the S&P 500 remains only 2.
  • The percentage of XLF components with a 14-day RSI above 70 reached a five-month high.
  • July has historically been one of the stronger seasonal windows for XLF.

The AI ecosystem is still doing the heavy lifting, but financials are starting to broaden

The AI complex is still the market's most visible leadership group, and I've spent most of this year focused there. Still, prudent portfolio management means keeping an eye on where the rally might spread next. Lately financials have earned that attention. A record first half for global M&A and clearer capital-return visibility after the large banks passed the Fed's stress tests have given the group a friendlier backdrop. The story makes sense. The question is whether the internals agree.

Financials are broadening but leadership is not fully confirmed

They do, to a point. On a 10-day basis, financials are leading every sector in relat

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