DOW AND S&P 500 BREAK THROUGH 200-DAY AVERAGES -- INTERMARKET PICTURE FAVORS STOCKS
TECHNICAL STRENGTH... In a strong start to the week, the Dow and the S&P 500 stock indexes have exceeded their 200-day moving averages. The S&P 500 has also exceeded its March high. This pretty confirms our belief (which we expressed in our Market Message last Wednesday) that the second leg of this advance in now in progress. We also suggested that the NYSE indexes could approach the tops of their eight-month trading ranges. That's where we think the market is headed. That would mean a 9,000 Dow and an S&P 500 near 950.
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AIRLINES, FINANCIALS, AND TECHS LEAD RALLY... With oil prices falling, the Airline Index is trading at a two-month high today and is one of morning's strongest groups. Financials are strong. Last week we showed the Broker Index exceeding its 200-day average. Today it's the banks. The BKX Index has done that and is now trading at the highest level since January. The SOX Index is leading another strong technology day. The SOX has bounced off its 200-day moving average, which has become its new support line. Internets are also strong.
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INTERMARKET PICTURE FAVORS HIGHER STOCKS... Global markets got off to a strong start and helped our markets lift off today. The French and German markets are showing gains of 4% and 5% respectively. Oil and gold prices are falling -- as are bond prices. The yield on the 10-year T-note is challenging its 200-day average. A close above that line would be bearish for bonds, but bullish for stocks. [The 30-year yield has already exceeded that line]. The dollar is strong. The intermarket picture continues to favor higher stock prices.
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