WEEKEND REPORT- WATCH THE FINANCIALS

Recently, we told you to watch the financials as they were starting to show slight distribution. This is a no biggie until it becomes more than slight. On Friday, it started to get more than slight. We tell you to watch the financials because along with the semis, they have led the market upwards since the election. If they start to break down, one has to pay attention. Specifically:

KRE below $56                                                                                                                                                                 KBE below $44ish                                                                                                                                                             XLF below $24.30 and then $24.                                                                                                                                 On top of that, start watching the 50 day moving average for names like Goldman, Morgan Stanley, Citigroup and others. A break below and a stay below changes the complexion for now.

The good news is that major indices still have not had a 2% correction since the election. Good because of it but bad because one would think when a correction occurs, the one-sided trade could cause a bigger than normal correction…but until that time…

There continues to be bull and bear markets side by side as it is imperative you stay in tune with “what’s working!”

From our recent notes, HOUSING continues to be strong but BIOTECH was roughed up off of some drug news on Friday. AMGN and REGN were smoked. We still think the group is in shape. We would now add CASINO/GAMING to the emerging file as a few names are on the cusp of moving out. One more group that is now showing up on our screens in the SHIPPERS. We also like recent action in many of the CONSUMER STAPLES.

Areas we would continue to avoid are just about everything RETAIL/APPAREL, ENERGY and as we have said, most commodity names as they have turned down and broke support recently. We are also less than thrilled with the TRANSPORTS now trading below the 50 day with AIRLINES being sold down.