Financials are regaining momentum

Key points: 

• S&P 500 Financial sector stocks experienced a significant shift upward in relative strength ranks 
• The S&P 1500 Investment Banking and Brokerage sub-industry group triggered a trend score buy signal
• Coinbase (COIN) recently generated a trend score buy alert

Although the AI ecosystem is my primary focus, areas within financials look compelling

The pace of broad market trading signals has slowed considerably as indexes have been consolidating (until today) following the rally from the April lows. In light of this, I've spent the past few weeks shifting my focus toward relative strength to highlight emerging leadership themes, most notably, the resurgence of stocks within the AI ecosystem, which continue to outperform. 

Still, prudent portfolio management requires diversification; we can't put all our eggs in one basket. With that in mind, I'm actively monitoring other groups for signs of strengthening relative trends. One area that caught my attention is the financial sector, which posted a sharp rise in 10-day relative strength rankings, leading all sectors on Monday.  

You can now visualize the data from the table above in a chart and analyze it using the backtest engine. The chart below shows that S&P 500 Financials stocks with a relative strength range rank of 80% or higher experienced a sharp uptick in recent sessions. 

According to the sector summary page, Financials are among just four groups with a higher share of stocks, scoring eight or above in both absolute and relative trends compared to the S&P 500.

The combination of a sharp rise in 10-day relative ranks and favorable long-term trend scores suggests that investors should look for potential opportunities within this group

When capital market stocks exhibit favorable trends, it's usually bullish for the overall market

The S&P 1500 Investing Banking and Broker sub-industry group recently triggered a trend score buy signal. If you recall, I highlighted an alert for Goldman Sachs in a report last week. 

The SPDR Capital Markets ETF (KCE) serves as a strong proxy for this group, comprising 61 stocks spanning investment banks, brokers, exchanges, and asset managers. Let's peek under the hood to see which stocks exhibit leadership. 

Bullish trend scores

Brokerages like Robinhood, Schwab, and Interactive Brokers,  along with exchanges such as Coinbase, Nasdaq, and Intercontinental Exchange, are showing strong absolute and relative trend scores, suggesting that 2025's volatility is favoring firms tied to heightened trading activity. 

Additionally, with momentum behind cryptocurrency legislation providing another tailwind, these names should be firmly on investors' radar. 

Coinbase, the digital asset exchange, recently generated a trend score signal. With shares trading only 3% below their all-time high and no overhead resistance in sight, a breakout could fuel further momentum.

What the research tells us...

Financials are regaining momentum, with notable strength emerging in investment banks, brokerages, and exchange stocks. This resurgence reflects an improvement in sentiment and activity within the capital markets, a key area of the financial sector that often signals broader market health. Recently, Coinbase, a leading digital currency exchange, triggered a positive trend score signal.

The rally over the past two days increases the odds that more broad-market signals will soon confirm the uptrend in stock indexes. Stay tuned.