STRONG ECONOMIC NEWS HURTS BONDS, HELPS STOCKS -- THE SOX JUMPS 4%
YIELDS HIT NEW 12-MONTH HIGH... A whole battery of strong economic news today appears to be confirming what the bond market has been telling us for weeks -- that the economy is getting stronger. As Chart 1 shows, that news has pushed the 10-year T-note yield to the highest level in a year. That means that bond prices have fallen a similar amount. When the economy strengthens, money should start flowing out of bonds and into stocks. We haven't seen too much of that -- until today. Finally, the good economic news is causing some serious buying in stocks.
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DOW IS CHALLENGING JUNE HIGH... In early afternoon trading, the Dow has gained 154 points and is threatening the previous high hit six weeks ago. Needless to say, a close above that resistance barrier would be a sign of market strength. The S&P 500 has climbed back over the 1,000 level for the first time in two weeks. The 50-day moving continues to provide support, thereby keeping the intermediate uptrend intact. The daily MACD lines for the Dow are turning positive. I'd like to see the same thing happen with the S&P. Yesterday, I expressed short concern about the recent tendency for volume to be heavier on down days. I'd like to see that trend reversed as well. Higher volume on up downs would be another encouraging market sign. The Semiconductor (SOX) Index is up 4% today and is the day's strongest group.
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SOX JUMPS 4%... The Semiconductor (SOX) Index has been bouncing off its 50-day average for the past two weeks. Today has been its most impressive day in more than three weeks. Some chip upgrades today are giving a big boost to the SOX. Over on the big board, National Semiconductor is jumping over its 50-day average on good volume. On the Nasdaq, Linear Technology is breaking out to a new 52-week high.
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