Financials Lead Stock Market to New Highs

Stocks went on a tear the last two weeks with all indices and sectors moving higher. In the past week, we saw fresh 52-week highs in the Russell 2000 (small-caps), Nasdaq (techs) and the S&P 500 (broader market). These new highs affirm the long-term uptrends in stocks and we have yet to see any divergences among the major stock indices. Among the sectors, the Technology SPDR, Finance SPDR, Consumer Discretionary SPDR, Energy SPDR and Healthcare SPDR recorded new highs this week. Outside of the Google-led move in technology, I was most impressed with the performance of financials over the last two weeks. The PerfChart below shows XLF with the biggest gain since the S&P 500 bottomed nine days ago.

Screen Shot 2013-10-19 at 8.35.55 AM
Click this image for a live chart

In addition to relative strength, XLF also sports a triangle breakout on the price chart. The chart below shows XLF gapping up from the 19.50 area and surging above triangle resistance. This breakout signals a continuation of the bigger uptrend. Notice that this surge occurred with strong volume as three of the last eight days topped 75 million shares. Using classical technical analysis, the triangle breakout targets a move to the 22.25 area. The height of the triangle is added to the breakout point for an upside target. Before getting too bullish, note that the ETF is getting short-term overbought after a ~7 percent surge. This means we could see a little backing and filling in the coming days.

Click this image for a live chart

Good trading and good weekend!
Arthur Hill CMT
Arthur Hill
About the author: , CMT, is the Chief Technical Strategist at Focusing predominantly on US equities and ETFs, his systematic approach of identifying trend, finding signals within the trend, and setting key price levels has made him an esteemed market technician. Arthur has written articles for numerous financial publications including Barrons and Stocks & Commodities Magazine. In addition to his Chartered Market Technician (CMT) designation, he holds an MBA from the Cass Business School at City University in London. Learn More
Subscribe to ChartWatchers to be notified whenever a new post is added to this blog!
comments powered by Disqus