DOW AND S&P 500 CLEAR 200-DAY AVERAGES -- ALL SECTORS RALLY -- MATERIALS, RETAILERS, AND TELECOMM HAVE STRONG DAYS
RETAILERS LEAD DAY'S ADVANCE... Our midday market message focused on the upturn in retail stocks that started this morning. By day's end, the retail stocks achieved big gains and helped lead an impressive stock market advance. Chart 1 shows the AMEX Retail Holders (RTH) jumping to a new two-month high on very strong volume. The retail ETF appears to be on the verge of breaking through its 200-day moving average. Please see our earlier message showing some of the retail leaders like Home Depot which is nearing a new 52-week high. Today's market rally was very broad with virtually all market sectors participating. Two groups achieving bullish breakouts were basic materials and telecom.
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GETTING MATERIALLY BETTER... We've been talking about the relative strength shown by basic material stocks. In today's trading the Materials Select Sector SPDR (XLB) broke through its summer high to reach the highest level since the spring. The top percentage gainer was US Steel which is on the verge of a new recovery high as well. Another big gainer was Louisiana Pacific which climbed to a new six-month high.
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TELECOM BREAKOUT... Telecom stocks had a good chart day. The AMEX Telecom iShares (IYZ) broke out to a new six-month high today. Its relative strength line has been rising since late June. Two of the biggest reasons for today's strength were SBC and Verizon Communications which are two of the biggest holdings in the ETF. SBC rose to the highest level in seven months. Verizon ended the day at a new 52-week high. Both relative strength lines have been jumping for the last two months.
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DOW AND S&P 500 CLEAR 200-DAY AVERAGES... The most impressive technical development of the day was the ability of the Dow and the S&P 500 to close back over their 200-day averages. The only negative was the absence of heavy trading volume. That may be due primarily to the fact that we're still in the last week of summer. Even with that cavaeat, it was an impressive market day. There's little doubt that today's strong price action will prompt some money off the sidelines. With one more trading day left in the week, there's a good chance that some of our weekly technical indicators will shift into positive alignment. All the market needs is more volume. That may arrive after the Labor Day weekend when all the Wall Street traders are back at work.
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