FINANCIALS HAVE A STRONG DAY -- BANK AND BROKER ETFS TURN UP -- ASSET MANAGERS INDEX HITS NEW RECORD -- LEADERS INCLUDE BLACKROCK, STATE STREET, AND BANK OF NEW YORK MELLON -- FINANCIAL RALLY MAY ALSO EXPLAIN SMALL CAP BUYING
FINANCIAL SPDR TURNS SHARPLY HIGHER... Financial stocks are having a very strong day. Chart 1 shows the Financial Sector SPDR (XLF) surging to the highest level in a month and, in the process, clearing its 50-day average. That puts the XLF in position to challenge its spring highs. A decisive close above that intra-day high near 24 would be a very bullish development. The 14-day RSI line (top of chart) has risen above the 50 level to the highest level in three months, which shows upside momentum. In additions, its daily MACD lines (below chart) have turned positive. All of which are positive signs for this key sector. Banks are the day's strongest financial group. Broker/Dealer stocks also look strong. And their charts reflect that strength.
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Chart 1
S&P 500 BANK SPDR TURNS UP -- SO DO BROKER-DEALER ISHARES... Banks are the biggest part of the financial sector. And they're leading it higher today. Chart 2 shows the S&P Bank SPDR (KBE) surging more than 3% to the highest level in a month. This represents its strongest day so far this year. The KBE recently found support near its 200-day average, and has cleared its 50-day average in decisive fashion. Its relative strength line (top of chart) is also having its strongest day of the year. Brokerage stocks also look strong. Chart 3 shows the Broker-Dealers & Securities Exchanges iShares (IAI) trading at the highest level in nearly three months. Insurers are also having a strong day. Asset managers, however, have the strongest chart patterns.
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Chart 2
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Chart 3
DOW JONES US ASSET MANAGERS INDEX HITS RECORD HIGH... The strongest chart in the financial sector belongs to the Dow Jones US Asset Managers Index. Chart 1 shows that financial leader breaking out today to a new record high. Its relative strength line (top of chart) appears to have bottomed as well. A couple of stocks in that group are also hitting new records.
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Chart 4
BLACKROCK AND STATE STREET HIT NEW RECORD... BANK OF NEW YORK MELLON MAY BE NEXT... The strongest chart in the asset manager group belongs to Blackrock (BLK). Chart 5 shows that stock continuing to hit record highs after achieving a bullish breakout during May. Chart 6 shows State Street (STT) hitting a record high as well. And Chart 7 shows Bank of New York Mellon (BK) breaking out of a bullish "symmetrical triangle" that started forming last December. Invesco (IVZ) is trading at the highest level in two years, while Northern Trust (NTRS) is close to a new record.
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Chart 5
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Chart 6
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Chart 7
FINANCIAL RALLY MIGHT BE HELPING SMALL CAPS... Today's strong rally in financial shares might help explain the day's strong performance in small cap stocks. Chart 8 shows the Russell 2000 Small Cap IShares (IWM) climbing to the highest level since late April. That puts the IWM in position to attempt an upside breakout to a new record. There may be a link between buying of small caps and financials. That's because financials are the biggest part of the Russell 2000 (27%). So it stands to reason that an upturn in financials would lend a lot of support to small cap stocks. Relative weakness in small caps and financial stocks has been a drag on the market for the first half of the year. Upturns in both groups would be a positive sign for them and rest of the market.
