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.
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