by Dana Lyons
Battered broker-dealer stocks are testing a potentially key line of support.
Entering 2018, one of the hottest – and one of our favorite – industries was the broker-dealer space. That mantle of relative strength was further reinforced by the group’s resilience in the post-January correction. In fact, the group, as measured by the NYSE Broker-Dealer Index (XBD), was among the first to return to new highs, doing so by late February. After strong follow-through into March, however, it has been a different story.
In the back half of March, the XBD saw a drawdown of nearly 10%. And a less than explosive rally back had us selling our broker-dealer position in mid-April. After some chopping around for the next month, the group was headed back lower again, undercutting those March lows in the past few days. So is there any hope for this languishing group?
Well, presumably it would help if interest rates resumed their ascent that had assisted, or at least corresponded with, the late-2017/early-2018 rally in broker-dealer stocks. Of course, that is conjecture, but there is also an objective, technical basis for some optimism towards broker-dealer stocks in the near-term.
As we showcased in today’s (early) edition of #TrendlineWednesday on Twitter, the XBD is presently testing a key Up trendline stemming back to its 2016 Brexit low, and connecting the election low in November 2016 and the low in September 2017.