DOLLAR AND BONDS ARE UP -- DOW TOUCHES 13-MONTH HIGH -- AMD HELPING PULL SOX HIGHER

BOND YIELDS ARE FALLING... After briefly hitting another yearly high last week, yields on T-bond and notes are falling today. The short-term indicators also suggest that yields may be putting in short-term tops here. The 14-day RSI is showing negative divergence near 70; and the daily MACD lines are turning down. That would suggest that bond and note prices are oversold and due for a bounce. [Yields on the 10-year T-note are also up against a three-year down trendline]. At the same time, the dollar is up 1% today against the Euro. Chart 2 shows the Euro fallng to a two-week low and threatening its July low. The stronger dollar is causing some selling in gold and gold stocks. Gold is down almost $5 today and gold stocks are experiencing some profit-taking. A firmer dollar, and a more stable bond market, are giving a boost to stocks. The Dow, which has been the strongest of the major averages, touched a 13-month high in morning trading.

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DOW HITS NEW HIGH... Just after noon (NYT), the Dow is trading 94 points higher and has moving through the top of the two-month trading range. That puts the Dow at the highest level in over a year. The Dow has been led higher recently by cyclical stocks, which have been showing good relative strength. Today is no exception. The strongest Dow stock is another cyclical component -- Honeywell. Chart 4 shows that Dow leader also breaking out to a new recovery high. Other Dow leaders today are General Electric, Hewlett, Intel, and IBM.

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AMD LEADS SOX HIGHER... Sectorwise, technology is the day's leading group. Within technololgy, semiconductors are the leaders. The SOX Index is up 16 points at midday and is threatening its summer highs. The leading SOX stock is AMD. Chart 6 shows the SOX leader rising above its April high on strong volume. A close above that chart barrier would be very positive sign for the stock and the group.

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