The recent performance of SPDR Financial Sector ($XLF) was analyzed using Elliott Wave Theory. The rally that began in April 2025 formed a 5-wave impulse, followed by a 7-swing correction (WXY). This correction suggested a decline, but buyers were expected to return to the market between $50.98 and $49.25, following the usual Elliott Wave correction pattern. The latest 4-hour update showed that $XLF bounced back as anticipated. It is currently rising in wave 1 of (5) and is expected to pull back in wave 2 before climbing again. If it breaks above $54.51, this will indicate further upward movement and cancel the chances of lower prices.

Elliott Wave Support and Strategy

Elliott Wave analysis indicates that $XLF is supported above the lows from October 2025. Traders are encouraged to buy during dips and keep an eye on the $55–$56 zone as the next target. Watching for corrective pullbacks can offer entry points. Using Elliott Wave Theory helps in understanding upcoming moves and managing risk effectively. The financial sector ETF, $XLF, seems to have stabilized after a recent pullback from earlier highs this month. The Q3 earnings reports from major banks have generally exceeded expectations, with net interest margins growing for the first time since the Fed’s last rate hike in early 2025. This sets a fundamental basis for the technical support found between $49.25 and $50.98. For derivative traders, any weakness in the coming weeks should be seen as a chance to buy. Pullbacks, possibly caused by renewed concerns about US-China trade or month-end volatility, could be great times to take bullish positions, like buying call spreads or selling cash-secured puts. As long as the lows from October hold, the trend appears to be upwards.

Path to Higher Levels

We are aiming for a clear break above the $54.51 level to confirm that the next upward phase has begun. This move should be supported by the recent rise in the 10-year Treasury yield, which has increased over 25 basis points in October 2025, indicating improved profitability for lenders. Once that resistance is crossed, the logical target will be between $55 and $56. This setup reminds us of the consolidation seen in financials during the third quarter of 2023, which then led to a strong year-end rally. However, the crucial point is that the recent low from earlier this month must hold as key support. A drop below that level would invalidate this optimistic outlook and require a reassessment of long positions. Create your live VT Markets account and start trading now.

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