MARKET CONTINUES TO HOLD SUPPORT -- CYCLICAL LEADERSHIP -- GOLD JUMPS
50-DAY AVERAGES CONTINUE TO HOLD... We've been talking a lot lately about 50-day moving averages. That's because that's an important support line during any consoldation period -- like the one we're in now. The S&P 500 has been bouncing off its 50-day line for the last three days. It managed a small gain again today. So far, the moving average line has been holding. So has the 14 day RSI line, which is continuing to stabilize near the 50 level, which is the first line of support in a market pullback. In our view, the daily MACD lines are more important, however. They continue to converge, but are still negative. They need to turn positive to signal any real improvement in the market's short-term trend.
Chart 1
CYCLICAL LEADERSHIP... One portion of the market that isn't in a holding position is the cyclical group. The Morgan Stanley Cyclicals Index hit another 52-week high today. Its relative strength line has also been rising against the S&P 500. That shows leadership. These are economically-sensitive stocks that do well when investors see an improving economy.
Chart 2
RYDER SYSTEM ADVANCES ON VOLUME... One of today's cyclical leaders was Ryder System. The trucker broke out to an 11-month high on rising volume. Its daily chart shows the stock moving up to challenge its high of last August near 28.50.
Chart 3
GOLD JUMPS $8 -- NEWMONT HITS NEW HIGH... On Monday, we showed gold prices bouncing off its 200-day moving average. Today, it rose another $8. As a result, gold stocks had a big day as well and rallied over 6%. Our favorite gold stock, Newmont Mining, broke out to the highest level in five years. New signs of weakness in an overbought dollar is giving a big boost to bullion.
Chart 4
AMAZON JUMPS -- AOL FALLS... Another star performer today was Amazon.com. The stock gapped off its 50-day moving average on very strong volume. That's very strong technical action. Some other tech stocks didn't far nearly as well. Especially AOL. AOL fell heavily -- and on heavy volume. That's a bad combination. AOL is threatening its 50-day average.
Chart 5
Chart 6
IMS HEALTH BREAKS OUT... Ims Health was the leader in a strong healthcare group. The chart shows the stock having broken out to a new 52-week high. It also did so on rising volume. A healthy combination.
Chart 7
SHERWIN WILLIAMS PAINTS A PRETTY PICTURE... Sherwin Williams broke out today to a six-month high in heavy trading. It weekly chart shows the stock challening the highs hit late last year. Judging from the price and volume pattern, an upside breakout appears likely.
Chart 8
Chart 9
PLENTY OF STOCKS ARE RISING... As we've been pointing out, the major stock averages appear to be in a holding pattern. It would be a mistake, however, to assume that everything is doing the same. As the above charts show, there are sectors moving up -- and plenty of individual stocks along with them. And they're doing so on rising volume. That's where the money is being made. [Please see "John's Latest Performance Chart" which talks about the reasons investors are buying cyclicals and selling bonds].
