DIVIDEND PAYING STOCKS HELP LEAD MARKET RALLY
BANKS AND UTILITIES SHOW BIG GAINS... The presidential plan to eliminate taxes on dividends gave a big boost to dividend-paying stocks today. Among the biggest beneficiaries were banks and utilities. The Bank Index is within striking distance of its August/November highs. The BKX also closed above its 200-day average for the first time in seven months. Two of the day's biggest bank gainers were Fleetboston and JP Morgan Chase. The Dow Utility Average gained over 4% today and was the biggest gainer among the Dow averages.
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UTILITY LEADERS... The three charts below show some of the day's biggest percentage gainers among the utilities. Public Service Enterprise is challenging its 200-day average and its August high. Southern Company is approaching its October high. Firstenergy is on the verge of a breakout to a new ten-month high. All three rose on strong volume. REITs also had a strong day -- possibly for the same reasons.
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DOW MOVING UP TO TEST RESISTANCE--MACD LINES TURN UP... The Dow Industrials rose to the highest level in a month. The next chart shows the entire pattern going back to last July. The Dow now appears headed for a test of the August/November highs just above 9000 -- and the 200-day moving average. The daily MACD lines turned positive today for the first time in a month. Notice that the last two "buy signals" took place during July and October and signalled pretty decent price advances. It's also a good sign that each MACD "buy" signal was at a higher level than the previous one. Two of the Dow's biggest gainers were in the banking the telecomm areas -- JP Morgan Chase and SBC Communications -- both of which achieved bullish breakouts. (Please read our midday update for more charts of banking and telecomm leaders).
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JANUARY OFF TO GOOD START -- RALLY NEEDS MORE VOLUME... If the early January gains are sustained through the balance of the month, that will be a good omen for the remainder of this year. The January Barometer holds that "as January goes, so goes the year". The ability of the major averages (like the Dow) to surmount overhead resistance barriers would be very encouraging. While breadth figures are showing solid improvement, the market still needs more volume to go along with its impressive price gains. Although today's NYSE volume was better than the last two weeks of holiday trading, it was just barely better than average. We'd like to see more.
