MARKET IS FINALLY RISING ON VOLUME -- SUMMER RALLY APPEARS TO BE STARTING
NASDAQ LEADS MARKET HIGHER... The Nasdaq market had the biggest percentage gain today and led an impressive market advance. This marks the second day of price gains accompanied by rising volume. That's something that's been missing for awhile. Chart 1 shows the Nasdaq Composite moving up to challenge its June high after bouncing off its 200-day average yesterday. Today's volume was even heavier than yesterday's which is a positive sign. The Nasdaq/S&P 500 ratio line is also rising again, which is a sign of Nasdaq leadership. That's usually a good sign for the rest of the market. Small cap leadership is another sign of strength. Chart 2 shows the S&P 500 Index moving up to a new two-month high. Chart 3 shows the Dow doing the same. Breadth figures were also positive. It looks like the budding summer rally is gaining some traction.
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TRANSPORTS HIT THREE-YEAR HIGH ... The Dow Tranports jumped 2% today and remain the strongest of the three Dow indexes. Chart 4 shows the Dow Transports climbing to the highest level in three years. Although the airlines are bouncing, the real leadership is coming from the rails and truckers. That's a sign of economic strength.
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SECTOR ETFS HAVE STRONG DAY ... The nine AMEX Sector SPDRS were up today. Energy (XLE) and Industrials (XLI) hit new 52-week highs. [The Industrials ETF is also being driven by transportation stocks]. Other ETFs showing leadership were basic materials and technology. One of the weaker ETFs -- consumer staples -- bounced off its 50-day moving average. All in all, a very impressive day.
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SUMMER RALLY IS ABOUT DUE... The traditional summer rally usually kicks in near the end of June and continues through July and sometimes even August. We're moving into that positive time window. The Fed will be making its tightening move on June 30 as well. The market seems to have discounted a quarter point hike. Assuming the Fed doesn't surprise with a more aggressive move (like 50 basis points), I expect the market to rally from that point into the summer.
