CAMPBELL SOUP, GILLETTE, AND SARA LEE ARE ALSO CONSUMER LEADERS.-- GE SHOWING MARKET LEADERSHIP -- P&F CHARTS OF MAJOR STOCK INDEXES -- RUSSELL 2000 MAY BE STARTING FOURTH WAVE CONSOLIDATION

CAMPBELL SOUP IS HEATING UP ... I wrote yesterday about new buying in the consumer staple group and showed a handful of recent stock leaders. With all the recent attention being given to basic material, gold, oil, and technology stocks, it's possible that a lot of investors may be overlooking impressive upside breakouts in the relatively dull consumer group. Here are a few that should get your attention. Chart 1 shows Campbell Soup jumping to a new 2004 high after having broken through chart resistance at its first quarter peak. Its relative strength line has been jumping as well. The point & figure boxes in Chart 2 show a series of buy signals since the start of October. The green x boxes in the last column show another buy being given today at 29.80. CPB would have to drop to 28.40 to negate the latest buy signal. In case you're thinking that CPB is already too expensive to bother with, take a look at the monthly bars in Chart 3. That longer term view makes Campbell Soup look historically cheap. The stock would have to rise to its early 2001 peak at 34.59 just to regain 38% of its previous bear trend. That seems like a pretty modest goal.

Chart 1

Chart 2

Chart 3

GILLETTE AND SARA LEE ARE BREAKING OUT ... Here are a couple more standouts in the consumer group. Gillette just recently broke through its June high and is trading at a new 52-week high. Its RS line has just exceeded its November peak and is now trending higher as well. That fits into the pattern I described yesterday of new relative strength in the group since the start of December. The daily bars in Chart 5 show Sara Lee climbing back over its spring highs. The RS line is also starting to bounce a bit. What I find most compelling about SLE is its monthly chart. The monthly bars in Chart 6 show Sara Lee challenging prior peaks formed over the last four years. A close above its November high would put the stock at the highest level since 1999. Now that's cooking.

Chart 4

Chart 5

Chart 6

GENERAL ELECTRIC IS FINALLY LEADING ... General Electric was one of Friday's standout performers. Its daily bar chart shows GE climbing toward its November peak on very heavy volume (see green circle). Notice the jump in its relative strength line as well (blue arrow). If GE can exceed the November high, that will put it at the highest level in nearly three years. The monthly bars in Chart 8 show that upward trend more clearly. It's also noteworthy that the monthly relative strength line has turned up for the first time in three years (see blue arrow). It's also broken a down trendline extending back to the first half of 2001. It's usually better for the market when this general is showing some leadership.

Chart 7

Chart 8

P&F UPTRENDS INTACT FOR MAJOR STOCK INDICES... I ended last week showing point & figure charts for the three major stock index ETFs. I did so for the sake of simplicity and to give some reasonably precise stoploss points under the market. The good news is that none of the stops were hit this week, which means that all three stock indices are still rated a "hold". To me, a hold means that I wouldn't necessarily be adding any new funds at this point. I'd just be holding onto whatever positions I already have. At least until the market starts to break some support levels. Which brings us to this week's stopout points. For the Dow Diamonds (DIA) in Chart 9, the stopout point remains the same as last week at 104. For the S&P 500 SPDRs (SPY) in Chart 10, however, the protective stop (for at least a portion of a long position) can be raised from 117 to 117.50. I'd still use 117 for a portion of the position. The most notable stopout change took place on the Nasdaq 100 Shares (QQQQ). Chart 11 shows that a short-term sell for the QQQQ has been raised from 38.25 to 39.00. Here again, it's usually best to stagger one's stoploss points.

Chart 9

Chart 10

Chart 11

SMALL CAPS MAY BE STARTING WAVE FOUR... A couple of weeks back I took a closer look at what I believe to be a fifth and final upwave in the cyclical bull market that started in October 2002. I wrote at the time that I thought the market needed a fourth wave correction or consolidation prior to fifth and final upleg. I used the S&P 500 at the time. It's pattern hasn't been very clear since then. So I've decided to try the Russell 2000 Small Cap Index instead. Actually, the RUT shows three waves pretty clearly. Wave 3 also matches wave 1 both in terms of size and duration. That still means that we need to see some type of corrective action to signal that a fourth wave has begun. This week's drop in the RUT was the biggest since wave 3 began in late October and violated the tight two-month up trendline (see gold circle). Although the downtown was relatively modest, the daily MACD lines turned negative. The black ADX line at the bottom of the chart has also turned down. Both are usually signals of a short-term top. Seasonally, a pullback from here would make sense as well. The traditional Santa Claus rally usually kicks in near the end of the month. That gives the market another week or two to do some "backing and filling" which might qualify as a fourth wave (which is often just a sideways consolidation). That could pave the way for a fifth wave rally that would carry us into the new year. As always, the key level to watch is the 50-day average. Nothing serious can go wrong as long as the RUT stays over that rising support line.

Chart 12