BROAD-BASED RALLY CONTINES -- COULD TURN INTO INTERMEDIATE ADVANCE
INDEXES EXCEEDING MOVING AVERAGES... One of the easiest ways to see which group average are leading the market higher is to look for those that are breaking through moving average lines. The most impressive is the Nasdaq, which has exceeded both its 50- and 200-day lines. Two of the tech indexes that have done the same are the Internet and Semiconductors. Some of the standout performers in the last two indexes are Altera and Zilinx (in the SOX) and Yahoo on the Internet. Chart 5 shows that Yahoo may be the verge of a very bullish breakout going back almost two years. Techs weren't the only winners. Several stock and group index closed above 50-day moving average lines.
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INDEXES EXCEEDING 50-DAY AVERAGE... One of the first requirements for an intermediate advance to take place is a close above a 50-day moving average. A number of stock (and group) indexes accomplished that task today including the Dow, the S&P 100, the S&P 500, the Russell 1000, and the S&P Largecap Growth Index. Among industry groups, the AMEX Biotech and Healthcare indexes did the same. Among international markets, the British stock market exceeded its 50-day line. That's a pretty broad rally. As we suggested earlier today, the main theme in these upside breakouts is leadership by large cap growth stocks. The rally is also global in scope. Healthcare stocks have been showing good relative strength since the start of the year. It's not surprising, therefore, to expect leadership from them as well.
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HEALTHCARE STANDOUT... Here's a chart of one of the strongest stocks in the healthcare group. Biomet has broken through its October high on rising volume. The weekly chart shows the healthcare leader moving up to challenge its highs formed during 2001. The rising ratio line (under the chart) shows it outperforming the AMEX healthcare index.
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INDICATORS SHOW IMPROVEMENT... Last week we used the NYSE Composite Index to measure the technical condition of the market. We looked at the daily, weekly, and monthly charts. Since then, the short-term trend has turned higher. We see that in two ways. The NYSE has exceeded its 20-day average -- and is moving up to its upper Bollinger band near 4846. Its daily MACD lines have also turned positive. The "intermediate" trend may be turning higher as well -- but hasn't done so yet. The weekly MACD lines are converging, but haven't yet turned positive. Also, the weekly price bar needs to get back over its 20-week moving average, which now sits at 4950. A close through that line could signal a further rebound toward the upper band and the top of the eight-month trading range. We wouldn't be surprised to see that happen. Especially with the leadership coming from the Nasdaq market -- and the Nasdaq 100 in particular.
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NASDAQ 100 LEADING MARKET HIGHER... Once again, the Nasdaq 100 turned in the day's strongest performances by gaining 4.5% today -versus 3.5% for the Dow and the S&P 500. The NDX is trading above its 200-day average -- and has already broken its three-month down trendline. That's the kind of leadership the market needs to see. Relative strength in the big tech stocks increases the odds that the current "short-term" rally in stocks could turn into a rally of "intermediate" proportions.
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