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S&P Battles Higher?


Keep an eye on financials as index struggles back to the 1000-level.

We've had a very strong run, and the S&P has now reached the critical level of 840, a line in the sand for most. I suspect we'll see quite the battle at this level, but it will ultimately be overtaken as we make our way back towards the key 1,000 mark.

At this juncture, it will be very important to study the underlying character of the stocks that led us here. I'll therefore be focused on the heart and soul of the tape, the financials. The XLF is trying hard to break a shorter term downtrend started during the early February pop (as noted in the chart below) while solidifying an inverse head-and-shoulder pattern.

A break here is what's needed after the ETF has moved sideways for the last several days, digesting the early March move.

Click to enlarge

Should this pattern fail, and the ETF head back towards the $8 level, caution will be warranted, since we'll more than likely be heading back to the bunker.

To play it, I'm finding a little more bang for my buck in regional land, and have been slowly building a position in the Regional Bank ETF (IAT). With a stop below $14.70 I still believe this ETF presents excellent risk reward and some of the components such as BB&T (BBT) and Fifth Third (FITB) may be just getting started.

We have a soft start to the week, which is needed if we want to go higher. A market can only go up in a healthy manner after digesting moves along the way.

I spent quite a bit of time this weekend digesting the charts. You can see and hear it all here.

Trade 'em well.

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Position in IAT

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