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Negative Momentum Shines; Yields Hits 2014 Lows

David Becker
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www.iforex.com
Negative Momentum Shines; Yields Hits 2014 Lows

Momentum stocks tumbled on Thursday and are poised to continue to test lower levels on Friday. The Bio-techs have been the worst performers as a sector since the end of February as investors have dumbed many of the stock that made more than 100% in 2013. New supply of stocks is continuing to overwhelm investors who have dumped stock and moved into treasuries pushing the benchmark 10-year yield down to 2.6%.

Banking giants JP Morgan Chase (NYSE:JPM) and Wells Fargo (NYSE:WFC) released earnings that were mixed, as JPM will likely detracted from the major indices on Friday. JPMorgan Chase reported an 18.5% slump in first-quarter earnings on Friday. The net earnings of $5.27 billion, or $1.28 a share, came in slightly below analysts’ expectations of $1.40 a share on revenue of $24.53 billion. Revenue dropped to $23.86 billion.

Wells Fargo edged higher after the banking giant reported net income of $5.89 billion, compared with year-earlier income of $5.17 billion. Per-share earnings were $1.05 versus $0.92 a year earlier. Revenue declined to $20.6 billion. Analysts polled had expected per-share earnings of $0.97 on revenue of $20.6 billion. Expenses declined significantly at the banking institution helping on the bottom line. Commercial loans were strong as well compared to JPM which suffered in this space.

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The IBB bio-tech index tested support near the 200-day moving average on Thursday and will likely trade around the 219 level for most of Friday’s trading session. The IBB has taken out all the gains made from the beginning of December of 2013. Momentum on the index is negative as the MACD (moving average convergence divergence) index prints in negative territory with a downward sloping trajectory. The RSI (relative strength index) moved lower with price action reflecting accelerating negative momentum while printing near 35, which is on the lower end of the neutral range.

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