MIDCAP INDEX HITS NEW HIGH -- S&P 500 RESUMES UPTREND -- RUSSELL 2000 BREAKS DOWN TRENDLINE

MIDCAP INDEX REACHES NEW HIGH ... I recently showed the S&P 400 Mid Cap Index testing its early March high and suggested that what it did at that resistance barrier held an important clue to market direction. Chart 1 shows that the Mid Cap Index breaking through its 2005 peak. That's helping pull large cap stocks along with it. Chart 2 shows the S&P 500 Large Cap Index reaching a new three-month high. That greatly increases the odds that the S&P could eventually reach the top of its 2005 trading range. Small caps are also showing upside leadership.

Chart 1

Chart 2


RUSSELL 2000 CLEARS 2005 RESISTANCE LINE ... It's usually a good sign for the market when small caps are leading it higher. That's why Chart 3 also carries some positive market signs. The Russell 2000 Small Cap Index has just broken a down trendline drawn over the January/March highs. That's a bullish sign. And the relative strength ratio along the bottom of the chart shows that small caps are once again rising faster than large caps (the S&P 500). That should help pull large cap stock indexes higher. That's probably enough to push them closer to the top of their 2005 trading ranges.

Chart 3

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