The financial stocks are in the perfect storm for further upside, no matter what happens in the stock market. They are already breaking higher today and the Financial Select Sector SPDR Fund (NYSEARCA:XLF) is likely to continue to at least to $25. The reason the financial stocks are in the perfect storm for upside is because the stock market price action is tied to interest rates and financial stocks are tied in the opposite way to interest rates. Let me explain. What drives the stock market down, pushes financial stocks up and vice versa. The stock market goes down when interest rates rise, yet when interest rates rise, financial stocks make more money, thus go up. When interest rates fall, the stock market rallies. So even though interest rates dropping is a negative for financial stocks, the up market cushions the financial stocks from dropping sharply. This creates the perfect storm for upside within the financial sector. 1. When interest rates rise, the stock market drops but financial stocks rise as they make more money on higher interest rates. 2. When interest rates fall, the stock market rises. Even though falling interest rates are negative for financial stocks, the up market cushions the downside.