There are several industry groups within the Financial sector that are acting the best, so MoneyShow's Tom Aspray takes a technical look at two stocks that look well poised to benefit from a stronger stock market in the last quarter of the year.

While the financial media was focused on the IPO of Alibaba Group Holding, Ltd. (BABA) on Friday, the overall market suggested a loss of short-term upside momentum.

The Dow Industrials bucked the trend as it did close higher and the Dow A/D line (see chart) did make further new highs last week. This was not the case of the NYSE Composite, S&P 500, or Nasdaq 100 A/D lines. Once again the small-caps took the brunt of the selling.

The short-term momentum and A/D indicators have turned lower consistent with a further decline over the near term. New concerns over China's growth are pressuring stocks with the Euro markets and S&P futures lower in early trading.

The Financial sector has started to emerge as a new market leader and there are several industry groups within the sector that are acting the best (Finding the Sweet Spot in the Financial Sector).

These two financial stocks look well poised to benefit from a stronger stock market in the last quarter of the year.

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Chart Analysis: Invesco Ltd. (IVZ) is a $17.7 billion dollar investment management company that has current yield of 2.3%.

  • IVZ is up 14.6% YTD as it broke through year long resistance, line a, five weeks ago.
  • This completed the upward sloping wedge formation, lines a and b, as the quarterly pivot resistance at $41.03 was overcome last week.
  • The weekly starc- band is at $43.11 with monthly projected pivot resistance at $43.75.
  • The weekly relative performance broke out ahead of prices as it overcame resistance (line c) three weeks ahead of prices.
  • The weekly OBV has also confirmed the price action as its resistance, line e, has been decisively overcome.
  • The monthly OBV (not shown) will also make a new high this month.
  • There is weekly support now in the $39.50 area.

The daily chart of Invesco Ltd. (IVZ) more clearly shows the upside breakout above resistance (line g) on August 18.

  • The rising 20-day EMA is at $40.51 so the EMA Osc closed 1% above its EMA.
  • The low last week was $39.97 with the daily starc- band at $39.69.
  • This also corresponds to the monthly pivot with the daily uptrend, line n, now at $38.94.
  • The daily RS line has been in a sideways pattern for the past few weeks and is now testing its WMA.
  • The daily OBV did make new highs this week before turning lower.
  • The OBV is above its WMA with more important support at line j.
  • Last week's high at $41.44 was just above the early September high of $41.28.

NEXT PAGE: 2 More Charts to Watch

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Total Systems Services, Inc. (TSS) is a $5.9 billion payment solutions provider that works with both financial and non-financial companies. It has a current yield of 1.26%.

  • TSS is trading 4.93% below its 52-week high and is down 3.58% YTD.
  • The weekly chart shows that prices are reaching the apex of a year long flag formation, lines a and b.
  • TSS has been in a tight range for the past six weeks as it has been trading on its 20-week EMA.
  • The monthly pivot is at $31.40 with the monthly projected pivot support at $30.75.
  • There is further weekly support in the $30.24 area, line b.
  • The relative performance is trying to hold long-term support at line d.
  • The RS line is just below its declining WMA and resistance at line c.
  • The weekly OBV has formed higher lows, line f, and has moved back above its WMA.
  • A move in the OBV above the downtrend, line e, could precede an upside breakout.

The daily chart of Total Systems Services, Inc. (TSS) recently bounced from good support, line h, and is now testing the monthly projected pivot resistance at $32.00.

  • TSS closed last week above the prior seven day highs.
  • The daily chart resistance (line g) and the daily starc+ band are at $32.50.
  • The 20-day EMA is now at $31.56 with the recent low in the $31.24 area.
  • There is more important daily chart support now in the $30.60-$30.80 area.
  • The daily RS line is trying to bottom as it moved back above its WMA on Friday.
  • A strong move in the RS line above the downtrend, line i, will signal it is a market leader.
  • The volume has picked up after the past week as the on-balance volume (OBV) has turned up from its WMA.
  • The OBV has long-term resistance at line k.

What it Means: A further correction after last week's soft close should be an opportunity to buy some of the new market leading sectors and financial stocks that are overextended.

These two stocks are acting like future market leaders. Any near term pullback needs to be followed by a strong weekly close to help confirm them as market leaders.

In last week's trading lesson, I recommended Select Sector Financials (XLF), SPDR S&P Bank ETF (KBE), and iShares Dow Jones US Broker-Dealers (IAI).

How to Profit: For Invesco Ltd. (IVZ) go 50% long at $40.41 and 50% long at $39.78 with a stop at $38.49 (risk of approx. 4%).

For Total Systems Services, Inc. (TSS) go 50% long at $31.54 and 50% long at $31.17 with a stop at $30.43 (risk of approx. 3%).

On this Tuesday, September 23, I will be giving a Webinar on FX trading techniques. If you would like to join me sign up here.