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Market Note: Semis, Banks, Brokers Achieve Lift-Off -- March 20

|Includes: IAT, KBE, SPDR S&P Regional Banking ETF (KRE), XLF

March 20, 2014

Despite the fact that the major averages were unable to break through recent resistance, several areas were on fire: banks (especially the smaller regionals), financial institutions (brokers in particular), and the semiconductors. The group-wide breakout action was reflected in the industry etfs. The Regional Bank etfs, KRE & IAT, gained the most with a 2% rise to hit new yearly highs. Next in line were the Semiconductor etfs, SMH & SOXX, followed closely by the Financial etf, XLF. (Note that all of these etfs pay a dividend currently yielding in the 1% to 1.5% range.) Most economists feel that it isn't a true rally without leadership in financials which, up until now, has been lacking. Today's breakout should be welcomed by the bulls as good news. (Note: On the flip side, the Transports have been lagging and selling pressure has been heavy--two signs that the road to rally may be filled with potholes.)

I've been saying for a year that the regional banks have looked attractive and many of them still do. Culling through the plethora (26) of break-outs in this group today, the following are my picks based purely on technicals as well as P/E. (I looked at those with P/E's under 15 which is the historical average value of the S&P 500.)

1. Fifth Third Bancorp: FITB: Closing price = $23.36, P/E = 11.4, Dividend Yield = 2.05%
2. PNC Financial: PNC: Closing price = $86.63, P/E = 11.6, Dividend Yield = 2.03%
3. Wells Fargo: WFC: Closing price = $49.03, P/E = 12.4, Dividend Yield = 2.45%
4. Huntington Bancshares: HBAN: Closing price = $10.01, P/E = 13.7, Dividend Yield = 2.00%
5. Regions Financial: RF: Closing price = $11.30, P/E = 14.3, Dividend Yield = 1.06%
6. Wintrust Financial: WTFC: Closing price = $49.62, P/E = 14.9, Dividend Yield = 0.81%

If any of these pique your interest, remember to research them for yourself before jumping on board.