The Dow Jones Industrial Average hitting 10,000 yesterday doesn't phase me one bit - in fact, I could care less. There, I said it, the cat is now out of the bag... But why so blunt about it?
In my honest opinion as a chartist, in order for the market to really enter its next HUGE price push higher, I feel it's necessary to see ALL of the market indices break above their current levels of resistance; this means that the $DJI, $SPX, $COMPX, and $RUT all must breakout. Why don't I really care about the $DJI surpassing 10,000? Because only 3 of the 4 indices are breaking out on their extremely bullish, 2 year weekly charts - the $SPX is the ONLY index that didn't break above its strong resistance level (1,100 is my target for the $SPX).
Does this mean I'm not bullish? Hell no - I'm strategically bullish right now, attempting to find the next best sector to hit and run from when the next leg higher takes a breather. This leads me into tonight's topic: the Financial sector. Earlier in the week, I was skeptical about how the markets would respond to the big corporate earnings popping up left and right. Although there was a day of weakness, the markets have taken an overall turn for the better and are beginning to look technically bullish yet again.
This is where my Financial sector theory comes in. During the first week to two weeks of the last leg higher, the first thing to explode to the upside was the Financial sector (specifically the Regional Banking industry). I began looking into some micro/small cap tickers in my Financial sector watch list this evening, and low and behold, the technical setups look solid.
Before I begin hitting you with specific tickers, however, let's review the action out of XLF and IAT (both charts are from after yesterday's market session):
XLF 2 Year, Weekly
IAT 6 Month, Daily
As you can see from the XLF chart, the bullish technical aspect coming out of the Financial sector is really beginning to take a turn for the better. The breakout above the long-term, descending trend line resistance is something to take note of, as nothing is technically restraining XLF from reaching 17.44 with the exception of the 100w SMA.
The action out of IAT since the beginning of October has been fantastic, with today's large price move pushing the 5d SMA across the 20d SMA and giving IAT the push it needed to get it past that 21.25 price resistance. IAT's ascending triangle price pattern currently has a price resistance at 21.84, which, if hit, will signal the second touch of this level. Normally, the 1-2-3 Resistance Test is highly probable and has a very low fail rate; the second touch of the price resistance's risk/reward is 60/40, so do as I do and be strategically bullish rather than absurdly bullish when it comes to the Regional Banking industry.
The
IAT chart and explanation above should convey to all of you that I am still playing the waiting game with the Financial sector but am preparing to pounce when the time calls for it. For now, check out these micro/small cap setups - the explanations of these charts will have to wait until later this evening, for I'm running low on time in between class:
KFN 3 Month, Daily
NPBC 3 Month, Daily
HBAN 6 Month, Daily
BEE 3 Month, Daily
FBC 3 Month, Daily
Remember - strategically bullish rather than absurdly bullish is the way to trade a market that has SO many bulls. Buy crazy traders aren't as successful as traders who don't mind sitting out every now and then and watching.
Good luck to all of you into the afternoon hours!
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