Let’s start with the headlines for today, “S&P 500 index sets new record”, “Why a new all-time high doesn’t mean a crash is due”, S&P new high is backed by 10% of its members”. Looks like we can say officially the index managed a ‘V’ reversal and now has eclipsed the high from July, and is a new high period. That settles it, the markets are officially still in an uptrend and all is well. The worries have been shifted to the back burner, the Fed is bullish on the economy and jobs, and buyers are still willing to buy the dips putting money to work. As the story goes, don’t fight the trend, embrace it and protect your downside risk. Attempting to fight the trend only ends up with you being disappointed in the outcome. Take what the market gives and keep pushing forward.
And with that in mind today we have to visit a sector we all love to hate these days… Financials! SPDR Financials ETF (XLF) broke above the July highs and looks ready to continue the upside move. The break of the $23 resistance level is a positive overall and it begs the question… where is the leadership coming from? Banks (KBE) up 3% in the bounce off the August 7th low, Brokers (IAI) up nearly 5% off the same low and Insurance (KIE) up 5.5% off that low. There have been some solid gains in the brokers and the insurance subsectors with some solid gains off the recent lows creating potential bottom reversals among the losers and laggards.
This is one of the dogs for the year as banks continue to be a drag on the broad sectors. The latest go around with the regulators, fines and lawsuit settlements have kept a lid on the broader sector. It has definitely been a stock picking sector and there have been some good opportunities for those willing to accept the risk . As this all unwinds I would expect there to be even more opportunities and gains to be had. For now I am willing to put this on my watch list and scan for the leading parts offering me above average risk/rewards.
Retail (XRT) was posted in our update on August 19th and it has continued to push higher with the next resistance at the $88.63 mark. The sector continues to have mixed earnings reports and some of the stocks have lost their upside bias while others have continue hit on all cylinders. American Eagle (AEO) has been strong on the upside move it started on earnings Monday. Children’s Place (PLCE) jumped 7.8% today on positive news. Kohl’s (KSS) has taken on leadership role in the big box discounters. This is more of a stock picking sector from my view near term than buying the whole.
Tomorrow ends the trading week and we are interested to see how all the good news is dealt with. Do we see any profit taking from the positive run off the lows of August 7th. A good old fashion test of the move would be a positive and offer more opportunities to add to existing positions or develop new positions in sectors moving higher. This is no time for speculation on leadership, but only to capture the opportunities as they present themselves.