BELLWETHER STOCK LEADERS
MICROSOFT EXCEEDS 200-DAY LINE... The three stocks shown below have two things in common. First, all three are considered to be bellwethers for the stock market. Secondly, all three are trading above their 200-day moving averages, and are helping lead today's impressive stock rally. Microsoft is the biggest stock on the Nasdaq and carries a lot of weight in that index. It's also included in the Dow and the S&P 500. The daily chart shows MSFT trading over its (red) 200-day average. That's usually one sign of market leadership. The monthly chart is more impressive. It shows that the 2002 decline resulted in a successful retest of the 2000 low near 20. That suggests that a bottom could be in the making for this big tech leader. The monthly stochastic lines have turned up; and the monthly MACD lines appear to be doing the same. The stock is trading around 26 today. It still has to exceed the 30 level, however, to turn its to signal that a bottom has been put in.
Chart 1
Chart 2
GENERAL ELECTRIC LEADS BIG BOARD HIGHER... General Electric is back above its 200-day average once again. That puts the big board bellwether in position to retest its March and the high set back at the start of December near 28. The second daily chart gives a longer perspective and shows that the February low was a successful retest of its early October low. That's how bottoms start. A close over the December high near 28 would confirm that a bottom has been seen in this influential NYSE stock.
Chart 3
Chart 4
MERRILL LYNCH LEADS BROKERAGE RALLY... Brokerage stocks are doing extremely well today. One of the biggest gainers is Merrill Lynch, which is usually the standard bearer for the group. The daily chart shows MER climbing over its 200-day moving average and hitting a two-month high. Chart 6 shows that the early March low in MER was well above the previous low hit last October. The stock may now be headed toward the upper part of its yearlong trading range in the mid 40s. It's normally a good sign for the market when brokerage stocks are showing leadership. All three charts are showing successful retests of previous support levels. At the very least, that suggests to us that they (and probably the rest of the market) are headed toward the top of their respective trading ranges. That fits into our overall view that the major stock averages (like the Dow and S&P 500) will probably move up toward the tops of their eight-month trading ranges. That would mean a Dow in the vicinity of 9000.
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Chart 6
