Top/Down Wednesday
A brief note on my Top/Down analysis into Capital Markets
I love performing Top-Down analysis, but what is Top-Down analysis you ask?
Well, I begin at the asset-class level to determine the best category of investment (at the moment, all roads lead us to stocks!) This then drips down to a specific area of investment with relative strength and momentum.
In today’s Top-Down analysis, I will be delving into Capital Markets.
What’s driving this momentum? Is it sustainable? And what are the best opportunities in the space today?
Let’s begin with the broader market view where I will analyse the S&P 500. S&P500 has been grinding higher and hitting new all-time highs since breaking out of its range that lasted from September to early November. With RSI comfortably within bullish regime levels which continues to show strength, no one can deny that this uptrend is strong.
Now, moving on to the sector-specific chart of Financials. Financials were a little late in joining the party, but they are now on their way towards their February highs and retesting their highs.
Looking at the Financials, the early November breakout from a key level of support and resistance has demonstrated to be a strong move with RSI moving into overbought territory and confirming bullish momentum.
Now look at Capital Markets with this massive big booty breakout to new all-time highs... this is what technical analysis live for baby!!
Comparing the industry to its sector on a relative basis. We can see Capital Markets has started making higher highs and higher lows as well as breaking above long-term resistance and closing at new 52 week highs! All signs of improving momentum!
Now let’s take a look at some of the holdings within Capital Markets.
Here is Charles Schwab $SCHW, a company that provides wealth management, securities brokerage, banking, asset management, custody, and financial advisory services.
Charles Schwab has it broke out of a multi-year base and took out a key level of resistance.
$SCHW has been underperforming the financial sector for the past two years, and I think this could be turning around as the relative ratio has broken back above a key level of resistance. Next test is its All-time Highs?!
Next is The Blackstone Group $BX, is an alternative asset management firm specialising in real estate, private equity, hedge fund solutions, credit, secondary funds of funds, public debt and equity and multi-asset class strategies.
Blackstone Group closed at fresh all-time highs for the first time since February as it resolved higher from a constructive base. It is also working on resolving higher from a basing pattern relative to the financial sector, Will we now see a move to the 161.8% Fibonacci level?
Lastly is MSCI $MSCI, which is a company that provides investment decision support tools for the clients to manage their investment processes worldwide.
The stock has been in a primary uptrend on an absolute basis for a decade now.
On a relative basis, the underlying trend is higher, but it’s been stuck in a sideways consolidation vs the financial sector since early 2020.
Will we see an absolute price move to the 261.8% Fibonacci level and a breakout to the upside on a relative basis?
That’s a wrap for today, hope you enjoyed my charts, and please don’t forget to share your ideas in the comment section or get in contact with me on Twitter @granthawkridge.
Stay safe and good luck out there…
GH
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