US Financials Hit All-Time Highs In Total Return

JC Parets
November 6, 2019

You can now add the Financial Sector Index to your list of new 52-week highs. This is further evidence of expansion in upside participation, not contraction. Breadth improvements like this keep adding up, there's no denying that. It's hard to make the argument that Financials are underperforming when they're hitting new 10-month highs relative to the S&P500, which is the exact opposite of underperforming.

Rotation rotation rotation. It's the lifeblood of a bull market.

Remember when the bears were arguing that it was defensive rotation and the market was being driven by Utilities and Staples? Well both of those sectors are actually down YTD relative to the S&P500 and still making new relative lows.

So yes, positive rotation is what we're seeing.

Today we're looking at Financials pushing up against their historic 2007 highs for the 3rd time:

Click on Charts to Zoom in

The way I learned it was that the more times a level is tested the higher the likelihood that it breaks through. I don't know if this is going to be it, or if it will take a 4th or a 5th test. But I do think there is a blog post coming soon where we're looking at Financials at all-time price highs.

Meanwhile, on a total return basis, Financials are already making new all-time highs this week:

We can go back and forth about price only charts or dividend adjusted, but all-time highs and pushing against all-time highs are both characteristics of uptrends, not downtrends.

Now, I think the big thing to remember here is how little progress has been made on a relative basis. We're actually still where we were in March 2009 in Financials relative to the rest of the market. Does that sounds like too extended to the upside? lol

For me, Financials breaking out relative can be a short-term catalyst to get things going to the upside. But bigger picture, we haven't even gotten started. We could still be in the infancy stages of this bull market.

Anyway, this is what's happening in Financials right now. It's an interesting debate about price-only vs total return. I'll have a post up soon on that subject.

JC

 

Also see:

New Weekly & Monthly Highs Everywhere

US Interest Rates In No-Man's Land

The Higher Stocks Go, The More Angry They Get

 

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