Insights 
VT 
The recent performance of SPDR Financial Sector ($XLF) was analysed using Elliott Wave Theory. The rally from April 2025 unfolded as a 5-wave impulse, followed by a 7-swing correction (WXY). The correction anticipated a decline, followed by buyers re-entering the market between $50.98 and $49.25, adhering to the typical Elliott Wave correction pattern.
The latest 4-hour update indicated that $XLF bounced as predicted. It is currently trading higher in wave 1 of (5) and is expected to undergo a pullback in wave 2 before rising again. A break above $54.51 would signal further upward movement, negating the possibility of lower prices.
Elliott Wave Support and Strategy
Elliott Wave analysis suggests that $XLF remains supported against October 2025 lows. Traders are advised to buy the dips and watch the $55–$56 zone as the next potential target. Monitoring corrective pullbacks can provide entry opportunities. Applying Elliott Wave Theory enables an understanding of upcoming move structures and aids in risk management.
The financial sector ETF, $XLF, appears to have found solid footing after its recent pullback from the highs set earlier this month. The recent Q3 earnings reports from major banks have largely beaten expectations, with net interest margins expanding for the first time since the Fed’s last rate hike in early 2025. This provides a fundamental basis for the technical support we’ve seen hold in the $49.25 to $50.98 range.
For derivative traders, this suggests that any weakness in the coming weeks should be viewed as a buying opportunity. Pullbacks, perhaps triggered by renewed US-China trade jitters or month-end volatility, could be ideal moments to initiate bullish positions like buying call spreads or selling cash-secured puts. The structure implies that as long as the October lows hold, the path of least resistance is higher.
Path to Higher Levels
We are looking for a decisive break above the $54.51 level as confirmation that the next upward leg has begun in earnest. This move would likely be supported by the recent uptick in the 10-year Treasury yield, which has climbed over 25 basis points in October 2025, signaling better profitability for lenders. Once that resistance is cleared, the next logical target area sits between $55 and $56.
This setup reminds us of the consolidation we saw in the financials during the third quarter of 2023, which was followed by a strong year-end rally. However, the key is that the recent low from earlier this month must hold as the primary support. Any break below that level would invalidate this bullish outlook and force a re-evaluation of long positions.
