TECHS LEAD LOW-VOLUME BOUNCE -- IBM SURVIVES DOWNGRADE -- ADOBE LEADS NASDAQ RALLY -- AIRLINES ADVANCE

DOW HOLDS 20-DAY LINE... All the major stock averages closed higher today. Breadth was positive. The Dow Industrials managed to hold its first line of support at the 20-day moving average which sits at 9429. However, volume was very light. One of the more encouraging moves within the Dow today took place in IBM, which opened lower and closed higher.

Chart 1

IBM RECOVERS AFTER DOWNGRADE... Earlier in the week, a brokerage upgrade pushed IBM into a challenge of chart resistance at 90. Today, a brokerage downgrade caused early selling in the stock (and the Dow). Chart 2 shows, however, that Big Blue shrugged off the early selling to close higher. And it did so on a day that saw heavy volume. That type of action is usually a sign of underlying strength in a stock.

Chart 2

ADOBE LEADS TECH RALLY... Adobe Systems was the top percentage gainer in the Nasdaq market today. The stock gapped up on massive volume and is challenging its June high at 40. A close through that chart barrier would put the tech leader at a new 52-week high. Chart 4 shows that the next resistance barrier after that was formed during the spring of 2002 near 44.

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AIRLINES STAY STRONG... The airlines group continues to show good relative strength. The Airline Index (XAL) was one of today's biggest gainers and isn't too far from another 52-week high. Its relative strength line versus the S&P 500 has been rising since since March. Yesterday, we showed Southwest Air testing its summer high. It broke through that chart barrier today. Today's airline percentage leader was Continental. Chart 6 shows that CAL has been moving up on strong volume and is near a new yearly high. It's relative strength line is measured against the Airline Index and shows CAL to be a leader in the group. Today's strength in airline stocks was matched by weakness in the energy sector.

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