Securities Research Services

Thursday, August 23, 2007

Financials Perky

Bearish sentiment continues to rage, though fear levels have come back significantly.

Yesterday we noted that the market could either break higher or pull back into what we argued would be a good, low-risk buying opportunity. Indices may or may not pull back from here, but it looks to us as if shorts are going to continue to be pinned to the wall here, forcing them to cover at higher and higher points.

Significantly, the financial sector is showing a good deal of accumulation at current levels. Stocks with the most exposure to sub prime are still iffy, but other stocks in the sector that were taken down on fears this month are now showing leading bullish divergences with a number of important technical indicators, indicating strong accumulation taking place.

As financials go, so goes the market they say.

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