XLF On The Verge Of Hitting A New All-Time High Since Late 2017

Commenting on today’s trading Gorilla Trades strategist Ken Berman said:

New All-Time High

Megan_Rexazin / Pixabay

Even though the late-session dip could mean that a short-term pullback is ahead, the fact that the large-cap benchmarks hit record highs in a concerted fashion is a positive sign for bulls. The positive trade developments caused a sigh of relief on the Street, but the Nasdaq and the S&P 500 closed well below their intraday highs despite the bullish headlines, and since small-caps were relatively weak throughout the session, so a short breather wouldn’t be a surprise.

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The major indices all finished in the green after hitting new all-time highs in early trading, as the U.S. reportedly agreed to gradually lift the tariffs slapped on Chinese goods this year. The Dow was up 185, or 0.7%, to 27,678, the Nasdaq gained 24, or 0.3%, to 8,434, while the S&P 500 rose by 8, or 0.3%, to 3,085. Advancing issues outnumbered decliners by a less than 5-to-4 ratio on the NYSE, where volume was slightly above average.

While tech stocks and financials pulled their weight, materials and the energy sector, in particular, has been the most active, as it has been the case all week. Sources close to the OPEC countries denied the recent rumors that another supply cut is off the Cartel’s table. Saudi Arabia is allegedly pushing for more support for the oil market ahead of the initial public offering (IPO) of Aramco, the state-owned oil giant, and another decrease in the OPEC’s output could easily push the price of crude oil back above the key $60 per barrel level.

Disney reported earnings today after the bell, and the firm which has been in the spotlight due to the recent launch of its streaming service beat estimates both on its top and bottom liners. The company is among the most valuable ones to report this week, and since the stock spiked higher initially, in after-hours trading, it could give a boost to the broader market tomorrow. Two major players, Duke (DUK) and Amaren (AEE) from the utilities sector will publish their quarterly numbers in the morning and following a great quarter for the sector, expectations are high despite this month's pullback.

Although we still don’t have a definite time or place for the ratification of the ‘phase one’ trade deal with China, today’s announcement make another escalation unlikely. Today’s large moves in Treasuries and other safe-havens confirm that some investors were still skeptical about the progress being made, and that could mean that there is still money on the sidelines that could fuel the somewhat stretched rally. Should the risk of an outright trade war further diminish, global economic trends and central bank policies could be the main drivers in the coming months.

We will have another fairly quiet day of domestic economic releases, with only the first reading of the Michigan consumer sentiment number coming out after the bell. While optimism seemed to have peaked this summer, and retail sales disappointed for two months in a row, analysts expect a slight uptick to 96 in the measure, and a more substantial increase would be very bullish ahead of the holiday season. The overnight session could already see active trading in the futures markets, since the Chinese trade balance data will come out, just one day after the Chinese yuan hit a fresh three-month high.

As the major indices once again hit all-time highs today, the rising short- and long-term trend are still in no danger, even though an orderly pullback could be in the cards in light of the lofty gains of the past month. The benchmarks are still well above their rising 200-day moving averages of 7,887 for the Nasdaq, 2,897 for the S&P 500, and 26,271 for the Dow, and they are also above their rising 50-day moving averages of 2,987 for the S&P 500, 8,112 for the Nasdaq, and 26,864 for the Dow.

The most popular financial ETF, the XLF, is nearing a very important technical milestone, as it is on the verge of hitting a new all-time high for the first time since late 2017.  The sector has been struggling due to the record-low level of global interest rates, the dire condition of the European banking system, and lately, the slowing global growth, but the tide might be turning. The ETF is clearly above both its 50- and 200-day moving averages, and it could be ready for a powerful breakout following the nearly two-year-long consolidation period. Stay tuned!



About the Author

Jacob Wolinsky
Jacob Wolinsky is the founder of ValueWalk.com, a popular value investing and hedge fund focused investment website. Prior to ValueWalk, Jacob was VP of Business Development at SumZero. Prior to SumZero, Jacob worked as an equity analyst first at a micro-cap focused private equity firm, followed by a stint at a smid cap focused research shop. Jacob lives with his wife and four kids in Passaic NJ. - Email: jacob(at)valuewalk.com - Twitter username: JacobWolinsky - Full Disclosure: I do not purchase any equities anymore to avoid even the appearance of a conflict of interest and because at times I may receive grey areas of insider information. I have a few existing holdings from years ago, but I have sold off most of the equities and now only purchase mutual funds and some ETFs. I also own a few grams of Gold and Silver