Financials Overbought Streak Reaches 24 Days, New High

The S&P 500 Financials sector index closed at a new all-time high yesterday. It was the 24th consecutive trading day that the sector's relative strength index remained above 70, a level that technical analysts consider overbought. The sector has gained 18% year to date, outpacing the S&P 500's 10% advance. Bank earnings have been strong, with net interest margins expanding as the Federal Reserve keeps rates elevated. Insurance and diversified financials have also rallied. The overbought reading does not guarantee a pullback. It does suggest that the sector is extended and could see profit-taking. The next major test for financials will be the Fed's rate decision on March 20.