Insights: Bullish Stocks
… and it's door #2. As we wrote in last week's Compass, the potential top pattern in financials (XLF) would resolve in one of two ways: (1) a breakdown below the $23 support level, resulting in a broad market correction; or (2), a rally above $24, thereby negating the pattern, and setting up financials (and the market) for a rally. The market chose the latter, with XLF closing Friday at $24.29, and on good volume.Participation within the Sector was broad: regional banks (KRE) rebounded off 200-day moving averages; same for broker-dealers like MS; and asset managers, ranging from IVZ to STT, continued their rounding process higher. All are buys.
We'll have more to say on the subject in this week's Compass, but the rebound in financials may prove to be the start of a broader trend: a rotation out of growth and into value.
It's premature for this conclusion—no trendlines have reversed—but last week's sell-off in the extended Tech Sector, combined with a rally in “undesirable†areas like energy, metals, and financials, point to a short-term shift. Again, we need to see confirming reversals in the charts, such as the Russell 3000 Growth/Value ratio's intact uptrend, Tech's intact relative strength uptrend, Energy's (still) intact downtrend, etc. So far, no reversals—but we are watching closely.
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Legg Mason is a holding company. Through its subsidiaries, the company is an asset management company that provides investment management and related products and services. The company's investment advisory services include discretionary and non-discretionary management of separate investment accounts for institutional and individual investors. The company's investment products include proprietary mutual funds ranging from money market and other liquidity products to fixed income, equity and alternative funds managed in various investment styles. The company also provides other domestic and offshore funds to both retail and institutional investors, privately placed real estate funds, hedge funds, and funds-of-hedge funds.
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