We mentioned there could be a positive catalyst this week with today’s bank stress tests results expected after the closing bell. Although the Financial stocks were slow and steady last year, the market has been waiting on them to lead “the” next leg higher.
The current stress tests are conducted by the Federal Reserve on the largest US banks to determine how prepared they are to withstand another possible financial crisis if one were to happen.
The tests are required under the banking reform legislation the zombies passed after the 2008 financial crisis. Last year, similar zombie tests showed 17-of-18 of the largest US banks could easily withstand a possible economic meltdown worse than the 2008 crisis.
Obviously, a perfect score would be super bullish but there are going to be 30 under the microscope after the close. The impact of more than one or several banks getting a “F” might be bearish but overall we expect the sector to get an “A”. The bigger tests are next week when the market will get a better clue on if the Financial stocks can raise their dividends.
Today’s results will impact Friday’s trading along with triple-digit witching day for options. Volatility could pick up a notch, good or bad, but the market could be setting up for a sweet spot that we mentioned would once again have the fund managers chasing.
As we make the turn, the indexes are pushing resistance once again and a follow through on Friday could get fresh highs in play.
The Dow is higher by 121 points to 16,343 while the S&P 500 is gaining 12 points to 1,872. The Nasdaq is jumping 19 points to 4,326 and the Russell 2K is advancing 4 points to 1,199.81. The small-caps have traded to a high of 1,199.98 as we head to press and We would like to see 1,200 trigger in the second half of trading. The S&P Volatility Index ($VIX, 14.70, down 50) is back below 15.
Subscribers, hit the Members Area as we are seeing some green on the first day of Spring! We have a Profit Alert on a trade that is up 67% and we are ringing the register on a quarter of the position. We also have a New Trade we are getting into.
Special Note: We could have additional New Trades and/ or Profit Alerts this afternoon so stay locked-and-loaded into the close.