Opening Gaps the Theme – Financials Leading Banks

As earnings remain the theme over the next few weeks, large gaps on the up and downside at the open can be seen as the more impactful companies report after the close of the previous day. After Wednesday’s close tech giant Netflix delivered a very poor earnings report that looked to weigh very heavily on Thursdays open. However, by morning, those losses were somewhat mitigated and a only a mildly lower open should be seen. After Thursday afternoon’s tech slide, perhaps the bulls will make a little stand.

Price patterns in the Dow, S&P 500 and NASDAQ 100 are now more indicative of a pullback or at least some sideways consolidation than an unabated continuation of the rally. Over the past week or two, we have seen sentiment surveys and option traders show a little too much greed, meaning that they are feeling a little too giddy about the stock market. Typically, after a sizable rally, that can cause some pause or giveback. I certainly do not believe a significant decline is underway nor a bear market.

I continued to be heartened by the recent strength in the semis as well as discretionary. If the banks can get going like the diversified financials have been, we could see another leg higher in stocks during summer. It’s been very interesting to see the banks going sideways while the financials have been so strong. Below, you can see the two groups, banks followed by financials.

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Paul Schatz, President, Heritage Capital
Paul Schatz, President, Heritage Capital
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