Q4 Rally is getting semi-official

It looks they are going to be able to manufacture the traditional Q4 rally this year despite the doubts. Even though interest rates are approaching 4 year highs - our tech favorites are killing it right now along with the financials. ;)

I think at this point you have to respect the move and see where it can take us. The financials hit an all-time high early this morning - here is the chart:

But here are the bond prices:

Do you notice a trend? In either? Here is the comparison chart again / updated of XLF v. TLT:

If you believe as I do that there is some correlation beteween the price movements of the two (the above is the longer term price patterns), then the shorterm term chart should be shouting:

Now here is the stumper - even if you think the move in the longer term treasuries is false and that yields will drop there when we see more inflation data - you have to concede somewhat that the Fed is probably going to take fed funds to 4.5 by January. Economists are currently putting that probability at about 90%. So even in the best case scenario - where longer term rates drop -we would be pretty much guaranteed a flat yield curve at minimum. I don't think that is priced into the XLF. Even if you think about it conceptually - the banks are coming off of the 3 best years in history practically. They originated more loans to more borrowers than ever. But that should already be priced in after Q3 earnings. I guess only time will tell how the effects of those lending practices and higher interst rates play out.

Bottom line: I don't have any juice left in the XLF and am done losing money there - but I will continue to track this divergence to see if I even had it close conceptually, over next few months. ;)

Also for those tech lovers out there:

Google hitting $385 earlier today and Sandisk - $64!!!!!!!!

Regards,

BG