Financials Leave Triple Top Behind

March 1st, 2013

by Dominic Cimino

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As I pointed out earlier this month, the Financials are also Making New Highs. I wrote "also," because the list of markets moving to either new recovery highs or new all-time highs continues to grow, and keep in mind that money had just begun flowing back into stocks in January of this year.

Below is an updated weekly bar chart of the Dow Jones U.S. Financials Index, which I presented back on February 12th. Notice that the triple top, with peaks placed in 2010, 2011, and 2012 (N.B. peaks are highlighted by red arrows and are at the Fibonacci 38% retracement level), has surrendered to the market's advance. The purple horizontal line above the market represents the 50% Fibonacci retracement level.

Given the market strength displayed by current charts, I can only imagine how much money may begin to flow into stocks if there is a twelfth hour agreement on sequestration, or even a delay. Granted, few consider this likely, but I can't help but imagine what if. If on the other hand, the market 'knows' that sequestration is instead inevitable, what else might have markets so energized? I can't say for sure, but my trading career taught me to be aware of sleeping giants.

P.S. If markets are just window shopping around old highs, we'll know in short order when support levels are breached. On a personal level, I believe this is a Fed induced rally, but I'm unwilling to guess when it may end and will instead watch chart levels.

Dominic Cimino

Registered Representative, Securities offered through Cambridge Investment Research, Inc., a Broker/Dealer, Member FINRA/SIPC. Investment Advisor Representative, Cambridge Investment Research Advisors, Inc., a Registered Investment Advisor. Preferred planning concepts, LLC & Cambridge are not affiliated.

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