A week after highlighting the strength of the stock market seasonality for the month of October, Freedom Capital Markets Chief Market Strategist Jay Woods has a warning for one sector this month.

Jay Woods on Financials

The financial sector jumps out to Woods right now, and not in a good way.

"The one chart that scares me right now… Financials," Woods said in a weekly newsletter.

The market expert highlights the SPDR Financial Select Sector ETF (NYSE:XLF), which has recently broken its uptrend and failed to hold a key support area. The ETF is also in danger of going even lower ahead of earnings season, Woods warned.

"Financials are often viewed as the market’s heartbeat. The sector accounts for roughly 12% of the S&P 500. When they strengthen alongside other stocks, it adds confidence that the economy is supporting the rally."

Woods said a strong financial sector can show confidence for economic growth and help support bull markets.

The market expert said looking at the near-term on the ETF chart shows the price trying to recapture the 200-day moving average and being oversold.

"History says financials don’t have to lead as we’ve experienced technology-led advances in 2020 and 2023. However, financials lagging is a yellow flag."

The signs of weakness in the chart have Woods "watching closely."

Read Also: EXCLUSIVE: Market Expert Jay Woods Picks Top 2 Magnificent Seven Stocks For Rest of 2026, 2027

What’s Next for Financials

The financial sector kicks off the next earnings season next week, with several of the major financial companies reporting quarterly results in the first few days of the week.

Here are some of the top earnings reports for financials at the start of next week:

Those financial results could make the financial sector volatile and could also signal whether the sector will push forward with gains or see shares drop further.

The XLF ETF is up 7.2% over the last six months, but is down 2.6% year-to-date in 2026 and down 0.4% over the last 52 weeks.

Read Also: Benzinga's 'Stock Whisper' Index: Five Stocks Investors Secretly Monitor But Don't Talk About Yet

Photo: REC and ROLL Stock/Shutterstock