History Will Help Guide Us Through Year End

I've discussed the fact that financials (XLF) LOVE the balance of the year.

In fact, the XLF averages outperforming the S&P 500 by a wide margin from September through December. How much? Well, it depends on the time frame we're looking at. Check this out:

• Past 3 years: +6.0%
• Past 5 years: +5.2%
• Past 10 years: +4.8%
• Past 12 years (current secular bull market): +4.3%

No matter how we slice it, financials tend to finish out the year quite strong. The two best industry groups in financials are investment services ($DJUSSB) and banks ($DJUSBK), which outperform the S&P 500 by 5.5% and 5.4%, respectively, over the past 12 years. It would therefore make sense to use any near-term weakness in leading stocks in these areas to purchase - at least in my opinion. Nasdaq OMX Group, Inc. (NDAQ) is one such stock. It's been moving straight up, but now does have a negative divergence, which could lead to some short-term selling. If so, be ready. Here's the chart

Enter Nasdaq OMX Group, Inc. (NDAQ):

The AD line has been exceptionally strong, indicative of potential Wall Street accumulation. But we've already seen two negative divergences print on NDAQ in 2024 and both did not end well. We could see a similar fate in September/October, but just keep in mind the long-term picture here and the fact that financials typically perform very well into year end. Accordingly, short-term selling due to momentum issues could very well present a solid entry opportunity into NDAQ. I'll be keeping it on my radar.

Happy Trading! Tom Bowley Chief Market Strategist EarningsBeats.com Better Timing. Better Trades.