Financials Also Making New Highs

February 12th, 2013

by Dominic Cimino

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The Dow Jones U.S. Financial Index is yet another index making new cyclical recovery highs. The making of new recovery highs or all-time highs by various indices is becoming a recurring theme. Notice the chart below. This is a weekly bar chart of the Dow Jones U.S. Financial Index. The horizontal red line represents the 38% Fibonacci retracement of the index's entire financial crisis sell off. Note how the area was stiff resistance in 2010, 2011, and again in mid-2012. But the resistance was breached in the final week of 2012, and 2013 has seen the market follow-through to the upside in concert with the broader based market's relentless rally. If you're overall bearish, you can no longer take solace in the fact that, "It's difficult for the market to rally without the financials."

The Dow Jones U.S. Financial Index has joined a growing list of those making new recovery highs. The list includes: the S&P 500 Index, the DJIA Index, the Dow Jones Transports Index, and the Russell 2000 Index. In fact, the latter two are not only making new recovery highs, but all-time highs as well, and the S&P 500 and DJIA indices are attempting the same.

In conclusion, even as I'm well aware of various indicators and metrics that imply a stretched-out market, I am at the same time becoming cognizant of a simple reality confirmed by charts – multiple markets are moving notably higher through key resistance areas. It will be interesting to see when and from where the next downward stock market correction happens, and if before then 'stretched-out' surrenders to 'very stretched-out', or even 'historically stretched-out'. 'Historically stretched-out' wouldn't surprise me at all. In fact, it would fit nicely into the list of other unprecedented phenomena that have accompanied this financial crisis.

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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