FEDEX AND YAHOO LEAD MARKET BOUNCE -- DOW STOCKS BOUNCING OFF 200-DAY AVERAGES -- MID AND SMALL CAPS TEST SUPPORT -- SECTOR LEADERS -- WATCH THE SOX
FEDEX, STANLEY WORKS, AND YAHOO JUMP... The three stocks shown below are helping lead another stock market bounce today. Chart 1 shows FedEx surging to a new three-month high on strong volume. The stock is safely back above its 50- and 200-day moving averages. That's giving a boost to transportation stocks today. Chart 2 shows Stanley Works jumping on heavy volume. A close over 40 would put the stock at a new 52-week high. Yahoo is leading a bounce in the Nasdaq market. The Internet stock has gapped higher this morning. The stock still needs to clear initial chart support at 45.50 and its 50-day moving average to turn its short-term back up again.
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TRANPORTS BOUNCING OFF 200-DAY LINE... One of the ways to gauge the condition of the stock market is to look at some of its weakest groups. The tranports certainly qualify. That's why the chart of the Dow Jones Transportation Average may finally show some good news. Chart 4 shows the Dow Transports bouncing off potential long-term support at its 200-day moving average. The daily RSI and MACD lines are showing positive divergence from an oversold condition. FedEx has a lot to do with today's transportation bounce. Even so, this would be a logical spot to expect some new buying to emerge in the group as a whole.
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DOW STOCKS BOUNCING OFF 200-DAY LINES... A number of Dow stocks have bounced off their 200-day moving averages over the last two days. 3M gapped off that line yesterday on impressive volume. That stock is often viewed as a bellwether for industrial stocks. Caterpillar is also finding new support near its 200-day line. Both stocks, however, still need to move back above their 50-day averages to turn their short-term trend higher. Chart 7 shows International Paper bouncing off chart support at its early February low -- and its 200-day moving average. It's somewhat encouraging to see new buying appearing around that long-term support in so many Dow stocks.
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MID AND SMALL CAPS TESTING SUPPORT... So far, most of the downside chart damage has been done to large cap stocks. That's why the next two charts are so interesting. They show the S&P 400 Mid Cap and the S&P 600 Small Cap Indexes testing initial chart support at their late February lows. Whether or not those lows hold may tell us if the recent downside correction is ending -- or if it's going to get worse.
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BANKS AND UTILITIES STAY STRONG -- $38 OIL BOOSTS ENERGY ETF... Bank and utility stocks continue to show good relative strength. Their daily charts show the Bank Index and the Dow Utilities trading above their 50-day averages. The utilities are close to achieving a new high. Energy stocks continue to hold up as well. With crude oil hitting $38 today, the energy complex is the day's strongest sector. Chart 12 shows the AMEX Energy Select Sector SPDR recently bouncing off its 50-day line.
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SOX MAY HOLD KEY TO NASDAQ... I touched on this point last night, but I thought it was worth a second look. The next two charts compare the Semiconductor (SOX) Index to the Nasdaq. The Nasdaq still hasn't reached potential chart support near 1900. The SOX Index, however, is starting to bounce off chart support at its December low. I point this out because the SOX has a big influence on the Nasdaq market. If the SOX support near 470 holds, that may provide new support for an oversold Nasdaq market. The fate of the Nasdaq may depend on the SOX.
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