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Mixed Messages

|Includes: KBW, Inc. (KBW), MS

 The major stock market indexes are trading mixed today. The Dow Jones Industrial Average is trading slight positive on the session while the S&P 500 Index, NASDAQ Composite, and the Russel 2000 Index are all trading lower. Since the Federal Reserve Bank announced its quantitative easing(QE-2) program in late August all the major stock indexes have rallied together like a pack of wolves. Today we are seeing the stock indexes diverge from each other and that is a change in character that is worth noting.

Many leading commodities such as oil, gold, silver, and copper are all declining sharply lower today. These commodities have helped to inflate the stock market indexes higher for nearly two years. While it is true that commodities may need to pullback or have a correction the financial stocks have now taken over as the market leaders.

Today all the major bank stocks are trading flat to higher on the session. The institutions have rotated capital out of commodities and moved them into the financial stocks. The financial stocks may have a little more upside as the daily charts as they still remain strong and many of the large banks have broken out to the upside. Therefore, this is now the sector to watch for a market correction or pullback. As long as these financial stocks continue to rally the stock market will hold up.

Goldman Sachs Group Inc.(NYSE:GS), and Morgan Stanley(NYSE:MS) are two leading financial that should pullback soon as they are starting to getting overbought and extended on the daily charts. Goldman Sachs will have daily chart resistance around the $180.00 area. Morgan Stanley will have daily chart resistance around the $29.00 level. KBW Inc.(NYSE:KBW) should also be closely followed and there will be important daily chart resistance around the $29.00 area. These are the stocks that should indicate a meaningful pullback or correction.

Nicholas Santiago