The weekly chart of the SPX shows it is still trending within a long term rising channel and there is no sign of rolling over.
(click on the chart to enlarge)
The SPX daily chart shows it has bounced off the intermediate trendline and it could enter the record book with a new all time high in the near term.
Similarly, the DJI continues to trend within its long term rising price channel.
It held above its recent pivot low and moving back toward its all time closing high.
The Nasdaq 100 was able to hold and bounced off its intermediate trendline support. However, it has suffered a more severe decline from the recent pullback due to selloff in some of the large cap tech stocks. In order to demonstrate it has the strength to move back to the recent high, it needs to move above the pivot high at 4483.05.
The Russell 2000 fell more than other major market indices during the recent pullback. It needs to move above the February pivot high at 1242.62 in order to show it has the strength to move back to its all time closing high.
As the large cap market indices such as the SPX & DJI are near their all time high, the question remains, “What is the next catalyst for the market to go higher?”
In an attempt to answer this question, one can look for sectors that are building strength. One sector that seems to be increasing in strength is the financial. The daily chart of the financial ETF, XLF shows it has just broken out to the upside from the apex of its converging wedge.
Below are some of the stocks in this sector that have been showing increased strength recently.
GS has formed a bull flag from the recent pullback and could be getting ready to breakout from this flag.
JPM’s stock price is testing the level being projected by the upper trendline of a rising wedge and could be set to break through it.
MS has been steadily grinding through the consolidation zone and could be moving toward its recent high.
BAC is once again near the resistance level at 16.60 and it could make another attempt to break through it.
The best of breed in banking, WFC could be on the verge of breaking into a new high.
C could break through the wedge it has been confined to since the end of 2014.
Although the financial could be the next catalyst to propel the market to new high, but one must remain defensive as the euphoria can take the market up quickly, and the market can reverse its direction suddenly. Only the market knows what it is going to do and it will always do what it wants to do. Therefore, listen to what the market has to say, ignore the naysayers and the talking heads.
