As much of the equity market marches to new highs on Monday, I'm keeping an eye on two groups of stocks specifically — energy and banks.
Energy stocks were broadly higher in Monday trading and have already seen a nice rally off their summer lows. If the XLE — a large energy-tracking exchange-traded fund — can break above its early November highs (just above $70), that's going to change the minds of a lot of skeptics about the group and attract even more momentum into the group.
Similarly, if the price of WTI crude oil can do the same and break above the $60 mark (which it neared in November), it would reflect further strength in the group and fuel another leg of the energy stock rally.
As for the banks, pundits have been pushing this group all year, and they've been dead wrong all year, as the group has underperformed.
To be sure, the financials sector has done well, but that's due in large part to some insurance and credit card stocks — not the banks themselves. However, two large bank-tracking exchange-traded funds, the KBE and the KRE, are now testing their March highs.
If they can both break meaningfully above those highs, the group could and should finally see the kind of rally many have been hoping for all year.