DOW CROSSES 50-DAY AVERAGE -- DROP IN OIL BOOSTS STOCKS -- TRANSPORTS ARE BIG WINNERS -- SOX WEAKENS

DOW CLOSES OVER 50-DAY AVERAGE... For a change, today's leadership came from industrial stocks. As a result, the Dow Industrials managed a close over their 50-day moving average. That puts all the major stock averages over that key resistance line. A $2.40 drop in the price of crude oil pushed that key commodity back under $40 today. News from OPEC suggests that the group will make a determined effort to push oil prices lower over the next few weeks. That should gave even more of a boost to the market. Once again, volume was on the light side today. If the the current rally has any legs, it's going to need more volume to push it higher. With oil prices falling, airlines gained 3.7% and were the day's top group. That, and continued strength in rails and truckers, gave the transports a a big boost. Dow Theorists should take comfort from the fact that all three Dow indexes are trading over their 50-day moving averages.

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TRANSPORTS NEAR APRIL HIGH ... Chart 2 shows the Dow Jones Transportation Average moving up to challenge its April high. That makes it the strongest of the Dow averages. Its relative strength line is already at a new high for the year. Most of the recent strength is coming from rails and truckers. Today's standout performer was Burlington Northern.

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BURLINGTON NORTHERN NEARS BREAKOUT... The daily chart of BNI shows the rail leader closing at a new four-month high today on rising volume. That puts the stock very close to a new 52-week high. Its relative strength line has been rising since early March. Relative strength by rails and truckers is usually a good sign for the economy. The monthly bars in Chart 4 also paint a positive picture. They show the stock also on the verge of breaking through its early 2001 peak. That would clear the way for a move up to its early 1999 high.

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BOEING AND COKE LEAD DOW HIGHER... Those two stocks were among the biggest gainers in the Dow today. Boeing hit another 52-week high. Coca Cola rose to a six-week high on rising volume. Other Dow percentage leaders were AIG, Disney, and Wal Mart.

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KLA WEIGHTS ON NASDAQ... The Semiconductor (SOX) Index fell today which explains why the Nasdaq lost a little ground. One of the biggest reasons was the weak action in KLA Tencor. Chart 7 shows the stock falling heavily today on rising volume. That's a bad combination. The fact that it fell from its 50-day moving average isn't good either. Chart 8 shows the SOX meeting resistance near its 200-day moving average.

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