Filed Under:
Tickers in this Article: BAC, WFC, C, KRE, AIG, DIA, IWM, SPY, QQQQ
Financials were in the spotlight this week as several banks including Bank of America Corporation (NYSE:BAC), Wells Fargo & Company (NYSE:WFC), and Citigroup, Inc. (NYSE:C) rallied sharply. Regional banks were also broadly higher, with the SPDR KBW Regional Banking ETF (NYSE:KRE) rising over 10% on the week. The general indexes also got a boost with a better than expected labor report on Friday, and also closed the week higher. Despite the outsized gains in the banks, American International Group, Inc. (NYSE:AIG) was the star of the week rallying sharply into their Friday earnings report. AIG followed up by reporting a positive report, and shares continued to rally, ending the week up over 100%.

IN PICTURES: 7 Tools Of The Trade

The Diamonds Trust, Series 1 (NYSE:DIA) ETF which tracks the Dow Jones Industrial Average continued its sprint higher, reaching as high as $94.50 before late day profit taking set in. The markets are overbought by just about any technical measure, but there is no rule that states they can't keep rising. DIA has now clearly extended itself from the prior base, and is in an intermediate uptrend until proven otherwise. The next resistance level looms at $96.50 from the November 4th election high.


The chart for the S&P 500 SPDRS (NYSE:SPY) ETF also shows continued strength, with a push above the psychologically important $100 level. The bulls have shown little mercy for the bears lately, and even the only profit taking during this entire run has been in the form of narrow range candles. While SPY was able to trade above the November 4th high, it hasn't decisively moved above this range and it could be an area of important resistance.

The iShares Russell 2000 Index (NYSE:IWM) ETF has outperformed both of it's large cap peers, by clearing the November 4th high and holding above it for several sessions. IWM shook off two days of weakness this week with a move to new rally highs on Friday. IWM is currently acting the strongest of the major market index ETF's, which would be a healthy development as it may show investors are willing to take more risk.


While the Powershares QQQ ETF (Nasdaq:QQQQ) has been leading for the entire rally, it appears to be tiring out, lagging the other markets this week. While QQQQ was the first to decisively clear its base and the November 4 highs, it failed to confirm a new rally high on Friday with the rest of the market ETF's. With many of its underlying components overbought and stretched out, it's possible that QQQQ is hinting at profit taking setting in for the markets.


Bottom Line
The markets continue to punish short sellers every step of the way, so it's important to recognize that each of the market ETF's is in a clear intermediate uptrend. They are making higher highs, and higher lows, while trading above rising moving averages. While it's likely that profit taking will set in soon, the underlying technicals would favor a pullback as a buying opportunity. A drop below the prior bases would be the type of negative development that could signal a reversal.

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

comments powered by Disqus
Trading Center