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Mortgage Finance At Major Support

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Financial stocks have lagged throughout 2014 and are showing signs of slowing momentum.  That's keeping hope alive for the bears.  The XLF (ETF tracking financial stocks) has a clear long-term negative divergence in play on its MACD as you can see from the chart below:

Most of the strength, however, has been concentrated in REITs, the defensive area of financials.  That's not exactly where I'd like to see the strength centered, but it is what it is.  One area of financials - mortgage finance ($DJUSMF) - has been lagging very badly as that industry group has dropped more than 6% over the past month, while many REITs have enjoyed gains in the 3%-5% range.  The good news for mortgage finance stocks is that they reached key 2014 price support near 5.85 before bouncing on Friday.  You can see this support on the following chart:

Financials are going to need to see strong earnings reports and guidance over the coming days to counter the slowing momentum issues discussed above.  

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Happy trading!

Tom Bowley
Chief Market Strategist/Chief Equity Strategist
Invested Central/EarningsBeats.com

Tom Bowley
About the author: is the Chief Market Strategist at EarningsBeats.com, where he provides stock market education, guidance, and trading strategies using a unique combination of technical, fundamental, and historical analysis. Tom provides EarningsBeats.com members with four portfolios (Model, Aggressive, Income, and Value), all designed to beat the benchmark S&P 500, and a revolving Watch List of hundreds of companies reporting strong quarterly earnings (must beat both revenue and EPS estimates) and exhibiting technical strength as well. These companies comprise EarningsBeats' annotated Strong Earnings ChartList (SECL), from which Tom trades exclusively. Tom writes a Daily Market Report (DMR) for members to include an executive summary, market outlook, sector/industry watch, and trading ideas. Learn More
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