Morning Market Thoughts
Good morning. The big news today is the shooting of Congressman Steve Scalise this morning during a baseball practice in Alexandria. News is still coming in and there are a lot of conflicting reports. While I anticipate that this will dominate some of the news today, it is not a dominant news item in the markets. The market is set to open relatively flat, with the S&P futures up 3.50; the Dow futures up 33, and the Nasdaq futures up 18 points.This afternoon, the Fed is expected to hike interest rates by a quarter point after their meeting adjourns today. The Dow Jones US Bank Index ($DJUSBK) has rallied nearly 7% over the past 5 trading days as traders start to factor in a better lending environment for banks. The regional banks ($KRE) have advanced even more. Last weekend I featured several banks as potential buying opportunities, including $WTFC, $EWBC, $HDB, $MS, $C and $FITB. I can’t say that any are at great entry points, but they definitely bear watching.
In general, I think that two sectors that definitely warrant attention (and investment) are the financial ($XLF) and metal/mining ($XME) sectors. They’re rallying for different reasons, but what’s important is that they are moving higher. Also, within the financial sector, the insurance stocks are doing particularly well. A very illiquid ETF dedicated to insurance companies is the SPDR KBW Insurance ETF ($KIE). When I’m looking at new sectors, one of the things I study is volume. The KIE contains nearly 50 different insurance stocks. How are you gonna decide which companies to buy? Let the volume characterists be your guide. The market is a voting mechanism, and the most “popular” stocks are where you want to be.
Two stocks that jump out at me are:
1. XI Capital ($XL), which is in a well-defined uptrend and at a low-risk buying point just today. Yesterday’s trading volume was 150% above average volume.
2. Aspen Insurance Holdings ($AHL) is still in a downtrend, but starting to form a base at $50 and is close to breaking above the 50-day moving average.
Also, an effort to cut back on the size of the big arms deal with Saudi Arabia has been defeated. The Aerospace/Defense sector ($ITA) continues to move higher. Stocks to consider are Honeywell ($HON), Lockheed Martin ($LMT), General Dynamics ($GD).
I’ll be in the trading room this morning and hope you pop in. There are always a lot of good trading ideas each day, and the “trending” and “moving stocks” tab on the right side of the page make it easy to find them.
–Dan
Market Update