Sorry!! The article you are trying to read is not available now.
Thank you very much;
you're only a step away from
downloading your reports.

Where Is the Bounce in Financial Stocks?

By

The financials could still get a bounce here but given the murky waters, on a relative basis versus the S&P 500, the sector could outperform over the next two months.

PrintPRINT
Last week I pondered whether the financial sector might be due for a bounce soon. (See Are Financials Ready for a Bounce Higher?)

Thus far the financial sector has not bounced. As we are heading into a long weekend and the tape is choppy I wanted to give a brief update.

I don't want to be yet another trader voicing how indecisive the market currently is given the many strong crosscurrents, but I must admit that it truly feels like the market could break in either direction. While my bearish side has somewhat more conviction at this point, the bull case just doesn't seem to want to leave my cranium. The major uptrend since September 2010 in the S&P 500 (SPY) remains intact and since fighting the trend has never been a winning strategy for me I should not lose sight of that.

I still feel that the financials could get a bounce here but given the murky waters I feel more comfortable saying that I think on a relative basis versus the S&P 500, the financials could outperform over the next two months or so. My reasoning remains as last week: 1) the financials have already lagged the broader market for some time and 2) the financials are coming into some technically supportive areas.

Note the divergence (read 'under-performance) of the Financial Sector ETF (XLF) as compared to the S&P 500 since March.



Since last week the XLF Exchange Traded Fund has broken out of the trading wedge and just below the 200 day moving average (red line), but note the stronger support (former resistance from 2010) at $15 just below.


Click to enlarge

Given the above-mentioned lack of clarity in broader markets, the major support and telling level at SPX $1300, and upcoming long weekend, I won't be leaning out of any windows and putting on a trade this week. I do feel, however, that the relationship of the financials versus the broader market warrants close attention as we roll into the summer and as such found this worth sharing.

Happy trading!

Editor's Note: For more great content from Serge Berger, please visit TheSteadyTrader.com.
No positions in stocks mentioned.

The information on this website solely reflects the analysis of or o= pinion about the performance of securities and financial markets by the wri= ters whose articles appear on the site. The views expressed by the writers = are not necessarily the views of Minyanville Media, Inc. or members of its = management. Nothing contained on the website is intended to constitute a re= commendation or advice addressed to an individual investor or category of i= nvestors to purchase, sell or hold any security, or to take any action with= respect to the prospective movement of the securities markets or to solici= t the purchase or sale of any security. Any investment decisions must be ma= de by the reader either individually or in consultation with his or her inv= estment professional. Minyanville writers and staff may trade or hold posit= ions in securities that are discussed in articles appearing on the website.= Writers of articles are required to disclose whether they have a position = in any stock or fund discussed in an article, but are not permitted to disc= lose the size or direction of the position. Nothing on this website is inte= nded to solicit business of any kind for a writer's business or fund. M= inyanville management and staff as well as contributing writers will not re= spond to emails or other communications requesting investment advice.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.

PrintPRINT
 
Featured Videos

WHAT'S POPULAR IN THE VILLE