FINANCE SECTOR CATCHES A BID -- THREE KEY BANKING STOCKS BOUNCE OFF SUPPORT -- AIRLINE INDUSTRY GROUP LEADS AGAIN IN 2014 -- AIRLINES, RAILS AND TRANSPORTS LEAD INDUSTRIALS SECTOR -- MARINE TRANSPORT STOCKS OUTPERFORM -- AIRLINE INDEX NEARS 52-WEEK HIGH
FINANCE SECTOR CATCHES A BID ... Link for today's video. That did not take long. I wrote about relative weakness in the Finance SPDR (XLF) and the Regional Bank SPDR (KRE) on Friday. Even though their price relatives have yet to breakout and signal a return to relative strength, XLF and KRE are showing some upside leadership on Monday. Before looking at the charts, it is worth noting that the major index ETFs (SPY, IWM, QQQ etc...) are in clear uptrends. This means the bulls have the wind at their backs and bearish setups, in general, are less likely to work. Chart 1 shows the Finance SPDR (XLF) falling sharply four days ago and bouncing back over the last three days (yellow box). Chart 2 shows the Regional Bank SPDR (KRE) breaking flag support with a sharp decline below 38 last week and then bouncing back towards 39 today. A rising flag is normally bearish, but this chart shows an overall uptrend that ultimately pulled trump. As such, I am resetting the April trend line and marking support in the 36.5-37 area. The bear flag looks like a failed bear flag, and a failed bearish signal is sometimes just as powerful as a bullish signal.
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Chart 1
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Chart 2
THREE KEY BANKING STOCKS BOUNCE OFF SUPPORT ... Chart 3 shows Citigroup (C) breaking a major resistance level in mid January and a major support level in early February. Talk about a volatile swing. Citigroup was leading the market in early January, but the mini-crisis in emerging markets derailed the breakout and pushed the stock below 47. The support break failed to hold as the stock bounced back to 50 with a sharp oversold bounce. Citigroup is interesting again because it is getting a bounce off this support level on Monday.
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Chart 3
Chart 4 shows Bank of America (BAC) breaking out at the beginning of January and then forming a pennant/triangle over the last few weeks. Broken resistance turns first support in the 16 area and the stock is getting a bounce off the triangle trend line today.
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Chart 4
Chart 5 shows Morgan Stanley (MS) hitting support after a sharp decline in January. The stock also formed a bear flag and broke support, but this flag has failed with a surge above 30 today. The second surge off the 29 area this month affirms support here and keeps the bigger uptrend alive.
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Chart 5
AIRLINE INDUSTRY GROUP LEADS AGAIN IN 2014... The DJ US Airline Index ($DJUSAR) was one of the best performing industry group indices in 2013 and is also one of the best performing industry groups in 2014 (year-to-date). The MarketCarpet below shows year-to-date performance for 161 Dow Jones industry groups. The airline group is in second place with a 17.82% gain in less than two months. Airlines are even outperforming biotechs. The DJ Consumer Electronics Industry ($DJUSCE) is in first place, the DJ US Distillers/Vinters Industry ($DJUSVN) is in third. I created this custom MarketCarpet from an existing ChartList that contains the 161 Dow Jones Industry Groups, which can be found by searching for "$DJUS" in the symbol catalog (sans quotation marks).
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Chart 6
AIRLINES, RAILS AND TRANSPORTS LEAD INDUSTRIALS SECTOR... Alternatively, chartists can view industry group performance using the industry group summary page (here), which shows the nine sectors and their associated industry groups. Chartists can view performance for several different timeframes and sort by column heading. The default sort for each table is by performance, which is also percentage change (% Chg). The screenshot below shows the DJ US Defense Industry ($DJUSDN) leading the industrial sector with a 6+ percent gain over the past month. Further down, but still positive, we can find railroads, transportation services and airlines. Trucking is the worst performing industry group with a 7+ percent loss over the past month. Even though trucking stocks are showing both relative and absolute weakness, the overall uptrend for the stock market may pull trump at some point. I would therefore keep an eye on stocks like JB Hunt (JBHT), which is testing a major support zone.
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Chart 7
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Chart 8
MARINE TRANSPORT STOCKS OUTPERFORM... Once the industry group is isolated for its performance, chartist can then dive into the individual components using the Sector Summary tool (here). Links can be found under the Dow chart on the Home page or in the "other tools" section on the right side on the Free Charts page. The first view is, of course, at sector level. Chartists can close or open each column by clicking the square icons in the upper right of each heading. The example below shows a sort by percentage change for the current day. Energy and healthcare are leading today. Click on a sector name to see the industry groups that make up this sector.
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Chart 9
Chart 10 shows the sixteen industry groups associated with the industrials sector. Again, the table is sorted by percentage change for the current day (Monday, February 24). Defense and marine transportation are leading today. Chartists can click on any of the industry group names to see the stocks that make up this group.
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Chart 10
Chart 11 shows the stocks in the airline industry, and it is clearly an international crew. Among the American carriers, Alaska (ALK), Delta (DAL) and Southwest (LUV) are leading in early trading on Monday. The two Chinese airlines are lagging with the biggest losses.
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Chart 11
AIRLINE INDEX NEARS 52-WEEK HIGH... At this point, I have decided to focus on the airline index. Chart 12 shows daily bars for the DJ US Airline Index over the last eight months. There is nothing but uptrend on this chart. After surging at the beginning of the year, the index pulled back in the second half of January and then moved higher the last few weeks with a short-term breakout at 165. The indicator window confirms relative strength with a rising price relative ($DJUSAR:$SPX ratio).
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Chart 12
ALASKA AIR AND AMERICAN AIRLINES LEAD WITH NEW HIGHS... Chart 13 shows CandleGlance charts for six US airline stocks. All are in uptrends over the last six months. Alaska Air (ALK) and American Airlines (AAL) are the strongest because they hit new highs over the last two days. Delta (DAL) and Southwest (LUV) are next because they are challenging their highs. Jetblue (JBLU) and United Continental (UAL) are bouncing off support. JBLU found support near the December lows and UAL is finding support from the January gap.
