STATE STREET LEADS BANKS HIGHER -- LEADERSHIP BY BANKS AND SMALL CAPS GOOD FOR THE MARKET

BANK INDEX HITTING 52-WEEK HIGH... Strong action in banking stocks is making the financial sector the day's leading group. Chart 1 shows the PHLX Bank Index moving to a new 52-week high today. Even more impressive is the ability of the BKX to rise above the highs formed during the first half of 2002. That puts the BKX at the highest level since the first half of 2001. The monthly bars in Chart 2 show that the Bank Index has been esentially in a broad trading range for the last five years. It now appears headed for a challenge of the upper end of that trading range. Today's top performing bank is State Street Corp.

Chart 1

Chart 2

STATE STREET LEADS BANKS HIGHER... The daily chart shows State Steet jumping over 50 today on very heavy volume. That's a healthy combination. The weekly bars in Chart 4 put that into better perspective. Today's upside move has pushed STT through past resistance ranging from 48-50, and puts the bank stock at the highest level in eighteen months. It gets better. The monthly bars in Chart 5 shows STT having just broken a major down trendline extending back to the fourth quarter of 2000. The next upside target is the early 2002 peak near 58. The relative strength line along the bottom has already broken out versus the S&P 500. That's makes the stock a market leader.

Chart 3

Chart 4

Chart 5

SMALL CAPS ARE STILL RISING... Small cap stocks continue to act stronger than large-caps. The Russell 2000 has broken through the previous peaks hit during 2001 and 2002. That's a sign of strength. The S&P 600 Small Cap Index is close to testing its all-time time reached during the first half of 2002. It's usually a good sign for the rest of the market when small-caps and financials are showing market leadership -- as they're doing right now.

Chart 6

Chart 7