Tags: S&P | 500 | Fail | 1 | 220 | Financials

S&P 500 May Stall at 1,220 on Financial Roadblock

Tuesday, 02 Nov 2010 07:23 AM

Financial companies may prevent the Standard & Poor’s 500 Index from breaking through its April high of 1,220, according to Carter Worth, the third-ranked technical analyst in last year’s Institutional Investor survey.

The S&P 500 Financials Index tracking 81 companies dropped below its average during the previous 150 days on May 18 for the first time in three months and has since failed in five attempts to overcome the threshold, which Worth uses to gauge a bull or bear market. The industry ranks second in weightings among the S&P 500’s 10 groups after technology, contributing 15 percent.

“The sector is literally ‘stuck,’ is at a standstill,” Worth, chief market technical at Oppenheimer & Co., wrote in an e-mail message to Bloomberg News. “The market is unlikely to eclipse its April highs without the financials coming to life.”

Financial shares were the only losing group in the S&P 500 during the past three months as concern rose that banks face more losses from bad mortgages. The Financials index fell 1.1 percent, compared with a 7.5 percent gain in the S&P 500.

Worth’s view set him apart from analysts who say a pickup in market momentum will help the S&P 500 extend the best September and October performance in 12 years. The benchmark for U.S. equities has rallied 13 percent since the end of August and is 3 percent away from its 2010 intraday high of 1,219.80.

Buy Signal

Katie Stockton of MKM Partners said the resistance will “ultimately be surmounted,” citing a buy signal flagged by the weekly Moving Average convergence/Divergence chart since September and the rise in the S&P 500’s cumulative advance- decline line.

“There are no negative divergences to suggest the rally is tiring from a long-term perspective,” Stockton, chief market technician at MKM Partners, wrote in a note to clients on Oct. 31. “Momentum is positive from an intermediate-term perspective, which dictates a bullish bias into year-end.”

Carter disagrees, saying financials hold the key for the S&P 500.

“Now there are those who would and will argue that equities can keep on advancing even as the second-biggest sector by market capitalization does not advance,” he wrote in a note to clients. “But we’ll take the other side of that bet.”

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Financial companies may prevent the Standard Poor s 500 Index from breaking through its April high of 1,220, according to Carter Worth, the third-ranked technical analyst in last year s Institutional Investor survey.The S P 500 Financials Index tracking 81 companies...
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2010-23-02
Tuesday, 02 Nov 2010 07:23 AM
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