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Banks and Brokers Break Out on Stronger Yields

David Becker
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www.iforex.com
Banks and Brokers Break Out on Stronger Yields

Stronger yields and a steepening yield curve has given a boost to the banking and brokerage sector igniting shares. The KBW Bank SPDR increased more than 2% Thursday and is poised to challenge highs formed over the last year.

An upside breakout would put the KBE at the highest level in seven years. The KBESPX ratio has also turned up for the first time in a year. The prospect for higher interest rates in the U.S. and a stronger economy may be driving capital into financial stocks, most of which benefit from higher rates. Two of the day’s top performers are PNC Financial Services (NYSE:PNC) and Wells Fargo (NYSE:WFC) .

PNC Financial Services surged more than 3% Thursday to a new all-time high. It just recently cleared its December peak near 93. Its relative strength ratio has also surged since mid-January.

That’s a good combination of absolute and relative strength. Wells Fargo (WFC) is poised to test its previous intra-day peaks at 55.58. An upside breakout would put that big mortgage lender at an all-time high. Its relative strength ratio has also broken out to the upside.

Brokerage stocks are also having a strong day with big percentage gains in Goldman Sachs (NYSE:GS) and Morgan Stanley (NYSE:MS) . Charles Schwab (NYSE:SCHW) shows that the stock testing its 2014 highs. Its relative strength ratio has turned up as well. The easiest way to participate in a rising stock group is through an ETF.

The Dow Jones Broker-Dealers iShares (IAI) is trying an upside breakout of its own. That would put it at the highest level in seven years. Its relative strength ratio has already broken out.

Momentum on the IAI has turned positive with the MACD (moving average convergence divergence) index generating a buy signal. This occurs as the spread (the 12-day moving average minus the 26-day moving average) crossing above the 9-day moving average of the spread. The index moved from negative to positive territory confirming the buy signal.

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