Today, I want to shed light on a crucial aspect of market dynamics: the recent emphasis on market breadth expansion. This metric gauges the number of stocks moving in sync with an index or a specific stock, a factor considered essential for sustained market growth.

To break this down further, a key player in this equation is the financial sector. For a broader market upswing, financials must show positive performance. The Financial Select Sector ETF (XLF) serves as an excellent indicator to track these developments.

Analyzing the XLF’s one-year performance, it’s evident that financials are lagging at 2.6%, notably behind the technology sector. However, a more promising trend emerges when observing the three-month timeframe, suggesting increased activity in the XLF.

Despite these positive signs, I maintain some reservations about the extent of these movements heading into 2024.

Zooming in on the XLF chart, you’ll notice a consistent support level around $3. It’s crucial to highlight that we are still trading above the 2008 highs, a significant period marking the onset of the great financial crisis. This resilience above those historical highs is inherently bullish.

To witness a substantial market breadth expansion in 2024, two critical factors must align in both the financial and technology sectors…

In today’s 3-minute video, I delve into the intricacies of the financial sector, outline the pivotal developments required for market breadth expansion in 2024, and identify key signs to monitor as we enter the new year.

— Serge Berger

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Source: Investors Alley