Finnies Swimming Upstream:
The sector finished last week on a strong note Friday CLOSING up better than 2%, to record the best gain among the major S&P groups. Monday early on they were among the laggards, but ended the day in the middle of the pack. Below is the ratio chart comparing the XLF to the S&P 500, and it shows the overall group is improving. Keep in mind GS had its best day in 10 years last month, and the space is firing on all cylinders with the exception of some of the exchange names. The XLF itself is looking to challenge its 200 day SMA since last November, and resistance there may be waning.
Moody’s No Longer Moody:
Back in 2011 Moodys along with S&P and Fitch downgraded the credit rating of the United States. It created an uproar at the time, but the stocks troubles seem to be in the rear view mirror. A 30% move off the lows of late December have the charts complexion looking much better. The velocity and trajectory of the move are steep, and perhaps need a pause but this recent move above its 200 day SMA and the inverse head and shoulders has the bulls confident.
Below is a chart of the finnie play MSCI, and how it was presented in our 1/24 Financial Report (that is the last one we have done as the sector did not warrant much attention). It is a good lesson to be aware of leading names, and how they are most likely to be the first ones out of the gate once the market catches in legs. Notice the big move, in bullish taut trade, between February ’17-August ’18. It has since broken above a 166.25 double bottom with handle trigger on 1/31, and now sports a bull flag formation, with a CLOSE above 176 carrying a potential measured move to 196.