Stock Market Update: Can Financials Lead The Market Higher?

S&P 500 Trading Outlook (2-3 Days):  Bullish

The S&P 500 (NYSEARCA:SPY) saw little to no overnight volatility (into Friday’s trading session) as a result of the UK election. A hung parliament provided little to no reaction out of equities but merely Pound Sterling weakness.

Although trading has stalled a bit, a positive stance is required until/unless the S&P 500 Index gets down below 2402.  Only if this level is broken, would that indicate that a topping process and/or decline is at hand.


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Treasury Yields have turned sharply higher with the US Dollar index and the Yield curve has steepened a bit. This has helped Financial stocks and the Financial sector (NYSEARCA:XLF) outperform.  The XLF broke out of its downtrend extending from the March highs, giving the sector even more conviction.  Any pullback in the Financials should be a buying opportunity.

Other significant developments include a waning in Defensive oriented stocks and sectors, with Utilities and Consumer Staples both turning down sharply as yields rise.

Chart Spotlight – Financials Sector (XLF)

The chart is through Thursday, and it should be noted that the Financial Sector (XLF) was up big again today.  As mentioned, XLF surpassed the downtrend extending down from March highs, suggesting further near-term gains for this sector heading into next week’s FOMC meeting (where a Rate hike has been priced into the market as close to a 90% probability.)  Prices became overbought, yet pullbacks should offer a chance to buy dips in XLF, thinking that additional upside is likely into next week.

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Twitter:  @MarkNewtonCMT

Author has positions in mentioned securities at the time of publication. Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of any other person or entity.