Financial Sector Stocks are Building Momentum

The major indexes dropped last week, although the pullback was rather muted. The oil sector pulled backed. So did the consumer-related ETFs and the technology ETFs. But one sector stood out – financials. XLF, the SPDR Select Sector Financial ETF, broke to a new all-time high. The On Balance Volume indicator shows steady accumulation since early October. The Up/Down Volume Ratio of 1.4 (an indicator popular with Investors Business Daily) confirms this. The volume chart shows volume on up-close days overwhelming volume on down-close days, along with volume spikes coming off short-term cycle lows.

What is significant about this chart, in the face of numerous mediocre charts of other sectors, is the financial sector often leads a market advance.

Is there consistency in the participation rate of the top-10 XLF component stocks?

Yes, most of them are participating in this rally (an Up/Down Ratio above 1.0 shows net accumulation):

While many healthcare-related stocks have been doing well and getting the attention, the financial sector has been quietly gaining strength.

If the markets open positively this week, the financial sector may offer some good trade possibilities. However, earnings season is about to start. It will be riskier to enter any trade on a stock before it announces earnings. But if any of the stronger candidates from the above list announce earnings that exceed expectations, new long-stock/bullish-option trades may work out well. Many of the above stocks have seasonal patterns (historical track records) of steady gains over the next 4 months.

Of course, there's much more you need to know and many more stocks you can capitalize upon each and every day.  To find out more, including the answer to the above question, type in www.markettamer.com/seasonal-forecaster

By Gregg Harris, MarketTamer Chief Technical Strategist

Copyright (C) 2014 Stock & Options Training LLC

Unless indicated otherwise, at the time of this writing, the author has no positions in any of the above-mentioned securities.

Gregg Harris is the Chief Technical Strategist at MarketTamer.com with extensive experience in the financial sector.

Gregg started out as an Engineer and brings a rigorous thinking to his financial research. Gregg's passion for finance resulted in the creation of a real-time quote system and his work has been featured nationally in publications, such as the Investment Guide magazine.

As an avid researcher, Gregg concentrates on leveraging what institutional and big money players are doing to move the market and create seasonal trend patterns. Using custom research tools, Gregg identifies stocks that are optimal for stock and options traders to exploit these trends and find the tailwinds that can propel stocks to levels that are hidden to the average trader.

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