The Daily Chartist: Keep an Eye Out for Financials Rally

June 1, 2000

The market is still oversold and rallies are still possible, even likely, over the next week or so -- maybe even rallies in the technology stocks. But while all eyes are busy watching those four-letter stocks, some movement is again underfoot on the New York Stock Exchange.

For two out of the past three days, the S&P and Dow Jones Industrial Average have posted losses, yet the advance/decline line has provided us with a positive reading on all three days, not just the one up day. And that improvement is not only in the oil and natural gas stocks; it continues to be in the financial stocks.

The NYSE Financial Index continues to hold its own. It has yet to break through that 550 area, but at the same time it has not given up gains it's made. I continue to believe a crossing of that 550 area would be a big positive for this index.

One of the stocks in this index is American Express(AXP Quote), which had its own minor breakout yesterday. And with volume, too! Here are two charts of the same stock. The longer-term chart, dating back to January 1998, shows the pattern this stock made in 1998: the big swoop down, the rally to resistance, the churning at resistance eventually led to a breakout and higher prices. Here in 2000, a similar pattern has emerged.

On the shorter-term chart, dating back to last summer, we broke this short-term downtrend line, but more importantly, we surpassed the 52 1/2 level that's provided resistance for nearly four months now. This stock must now contend with those three highs around 56, which should take some work to eat through. But the move through resistance says it's now likely this stock will hold on dips and eventually work its way higher.

Overbought/Oversold Oscillators

For an explanation of these indicators, check out The Chartist's primer.