Watching Financials for Market Direction

The S&P 500 is well above its 200-day moving average and the triple top December high, and the Dow Jones Industrial Average has taken out neckline resistance of the inverse head-and-shoulders pattern on the daily chart. Momentum is fading, however, and ultimately retests of these levels may occur. I'll be watching key levels in several of the financial stocks for longer-term clues to broader market direction in the start of the new year.

In "A Look at Financials' Long Side," a piece I wrote on Oct. 7, 2011, I used the SPDR KBW Banking ETF (KRE), and the formation of a morning star pattern on the weekly chart to illustrate the potential for a reversal move. A sharp rally in the financials ensued and, on Oct. 27, and I followed up with "Examining the Financials," on the technically overbought condition of the financials and the possibility of a retest of the previous breakout levels. This time I used charts of the money center banks and their short-term support levels. Those levels were retested, but were easily taken out and the stocks moved much lower....328 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.

Read the full story and get access to the Real Money Pro trading floor.

There’s no substitute for a trading floor to get great ideas, so Jim Cramer created a better one at Real Money and blogs there exclusively. We then added legendary hedge fund manager, Doug Kass, with his exclusive Daily Diary and best investing ideas. Staffed with more than 4 dozen investing pros, money managers, journalists and analysts, Real Money Pro gives you a flood of opinions, analysis and actionable trading advice found nowhere else, and allows you to interact directly with each expert.

Already a Subscriber? Please login.

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data provided by Interactive Data. Company fundamental data provided by Morningstar. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by Interactive Data Managed Solutions.

TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

IDC calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.