Last week, we pointed out how Consumer Staples – a classic defensive sector – had surged in response to the market selloff. That’s typical behavior during periods of volatility, and we noted that it would actually be a constructive sign if that strength didn’t hold.
Well… it didn’t.
With that behind us, the question shifts from will we bounce? to how far can this bounce go?
One sector we're watching closely for clues is Financials ($XLF). It broke down hard – and now it's coming back to retest all that broken support.
This is a crucial moment.
Historically, after sharp corrections like the one we just saw, markets tend to move sideways for months. They need time to digest the move.
If we’re going to ignore that playbook and rip straight back to all-time highs, it would be… unusual.
More likely? We’re at a logical level for sellers to step in, put a lid on this rally in financials, and drag us into that choppy, frustrating range we’ve come to expect after major market resets.
