EDITOR’S NOTE: Sam Collins is on vacation and will return on Feb. 21.
Equities ended last week on a high note. The Dow Jones Industrial Average gained 186 points, or 0.09%, on Friday, carrying the index back above the pivotal 20,000 level, the S&P 500 climbed o.7%, the Nasdaq gained 0.5% and the Russell 2000 rallied 1.5%.
Friday’s gains were accompanied by above average volume in the large-cap-laden Dow Jones and S&P 500. The widespread participation registered an accumulation day for both indices, suggesting institutions were piling back in. With a strong close to end the week, stock indices are heading into this week with the wind at their back.
Credit for Friday’s rise lies in large part with the financial sector. The Financial Select Sector SPDR Fund (NYSEARCA:XLF) lifted 2% on the day in response to President Donald Trump signing an executive order designed to ease the regulatory burden foisted on banks in the 2010 Dodd-Frank Act.
Friday’s strength coupled with the overall technical posture of XLF make it a must-watch sector for the week ahead. Financials have spent the past two months in base-building mode. In fact, a quick view of the weekly chart reveals a classic high base pattern beckoning to bulls. The MACD indicator is a whisker away from completing a buy signal. Watch for a breakout above $23.85 in the coming week.
If you prefer to play individual bank stocks, keep an eye on Morgan Stanley (NYSE:MS) which was one of the best performers Friday, rising 5.5% on heavy volume.
Elsewhere on the sector front the Materials Select Sector SPDR (NYSEARCA:XLB) and The Industrial Select Sector SPDR Fund (NYSEARCA:XLI) both boast solid pullback buys. Last week’s retreat carried both ETFs to attractive support levels offering low-risk setups to bulls.
Another positive development of note are the higher pivot lows formed in stock indices across the board last week. The Monday-Tuesday selling was halted before doing any damage of note. The pivot low created during the Wednesday-Friday rally was higher than previous swing lows suggesting buying demand remains in force.
Conclusion: Bulls continue to receive the benefit of the doubt here. With dips continuing to be bought and volume favoring buyers, now is not the time to bet against this bull market.
Today’s Trading Landscape
To see a list of the companies reporting earnings today, click here.
For a list of this week’s economic reports due out, click here.
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