Markets rebounded Wednesday after an ugly Tuesday session and it was the Nasdaq that posted an exact opposite of what it did just a day earlier, going out strong on highs gaining 1.4%. The small cap Russell 2000 was even more robust putting up a 1.5% advance. The S&P 500 was no slouch either with the benchmark rising .9% and it has slowly been cutting into the Nasdaq’s oversized YTD gains, and as it stands at the moment the Nasdaq has jumped 15.8% (it is on a 5 year winning streak, a feat it accomplished between ’03-07 and ’95-’99, and recorded a 6 year winning streak between ’75-’80) and the S&P 500 by 9% thus far in ’17. Looking at individual sectors that powered the way higher Wednesday it was the financials that are benefitting from rising treasury yields. Below is the chart of C and how it was profiled in our Friday 6/23 Game Plan. Today it broke above a bull flag formation and it is a good idea not only to examine the finnies, but to delve deep into which names have been outperforming, as those are the names that should advance stronger as rotation into the group expands. For example C currently sits right at 52 week highs, while peers JPM, BAC and GS are 4, 7 and 12% off their own respective 52 week highs. So as you can see all financials are not created equal, and their action is not by accident. Buy strength is the lesson learned here. Glancing at the XLF it now sports a nice looking cup with handle trigger of 24.69, and not long ago it completed an ominous bearish head and shoulders pattern between last December and this May. The pattern was never taken out to the downside and offers its own good lesson of being patient for PRICE confirmation. On the downside it was the utilities which were the only losers on the day with the XLU falling 1%.
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