MATERIALS INDEX CHALLENGING MAJOR RESISTANCE -- ATHLETIC FOOTWEAR HAS STRONG DAY -- MARKET AVERAGES ARE MIXED

LEADING SECTOR FOR THE DAY... The Materials Select Sector SPDR was the top performing sector for today. Chart 1 shows that the XLB jumped sharply and is trading at a new closing high for the year. The rising relative strength line along the bottom of the chart shows continuing leadership by this group. The more significant chart, however, is seen in Chart 2. The weekly bars shows that the material group is right up against the highs formed during the springs of 2001 and 2002. That puts the group at a crucial chart juncture. Needless to say, a decisive close through those chart barriers would be a bullish sign for the group.

Chart 1

Chart 2

PRAXAIR LEADS MATERIALS GROUP... Three of the day's percentage leaders in the materials group are plotted below. Praxair was the biggest winner and is trading at an all-time high. Freeport McMoran Copper & Gold has also soared to a record high. US Steel Group has reached a three-year high, but is well below its 1998 highs.

Chart 3

Chart 4

Chart 5

CONSUMER DISCRETIONARY LEADERS... Athletic footware had a good day. Reebok and Nike both hit multi-year highs. Chart 6 shows Reebok hitting the highest level in nearly six years. The more impressive chart, however, belongs to Nike. Chart 7 shows that stock breaking through the major highs formed during 1999. That's impressive chart action.

Chart 6

Chart 7

MARKET HAS MIXED DAY... In the face of a very strong third quarter GDP number, the market had a mixed day. The Nasdaq ended marginally lower while the big board ended a bit higher. Breadth figures, however, were positive on the Nasdaq and the NYSE. On balance, we'll call it a moderately positively day. The daily stochastic lines for the NYSE are still moving up from oversold territory. The daily MACD lines still haven't turned positive. In other markets today, the dollar pulled back a bit. One surprising feature was the bounce in the bond market in spite of strong economic numbers. Commodities pulled back a bit more. We're not going to read too much into the day's activity. The big question now is whether the economic recovery has already been discounted by the market. Today's unexciting action suggests that much of it has.

Chart 8

Chart 9

CNBC TOMORROW MORNING... I've been invited to CNBC tomorrow (Wednesday) morning. I'm scheduled to be interviewed around 9:45 am (NYT). Tune in if you can. This will be my first visit to their new headquarters. I hope I can find it.