The ratio chart below of the DJ Euro Financials vs. the XLF suggests the former could be reaching a support zone whereby they could out-perform the latter, at least in the very near-term.
Ostensibly, such out-performance would likely be coupled with some positive headline re: Europe’s banking sector troubles, which might positively boost global risk sentiment as well.
Possible spread trade long Euro financials and short the XLF until support lines (1) and/or (2) give way as a stop? If the ratio bounces here it could insulate portfolios that are directionally short, in the near-term.
Or is this grasping at straws and does the support for this ratio give up the ghost in a big way (most ratios showing any Euro asset vs. US-based ones have been giving up big long-term support as of late – check out the DJ Euro STOXX 600 vs. SPX)?