NASDAQ CLEARS 2100 -- DOW AND S&P TURN UP -- SUMMER RALLY MAY BE STARTING

DOW AND S&P TURN UP... After describing yesterday's upside reversal day last evening, I wrote that we needed to see some upside follow-through. We certainly got that today. All market sectors closed in the black with the exception of energy. Crude oil fell over a dollar today, which also gave a boost to the rest of the market. Biotechs were the day's top industry group. The Dow Diamonds closed above initial chart resistance (and its moving average lines) near 104 (Chart 1), and the S&P 500 SPDRS (SPY) closed above this week high at 120.65 (Chart 2). The SPX also survived a test of its 50-day moving average. Its MACD lines are on the verge of turning positive. The Nasdaq 100 Shares (QQQQ) also ended the week back above their moving average lines (Chart 3). The big star of the day, however, was the Nasdaq Composite market which hit a new high for the year.

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NASDAQ COMPOSITE CLEARS 2100 ... The Nasdaq Composite closed over 2100 today for the first time since the start of the year. Volume wasn't great, but did pick up on the bullish breakout. With the 2100 barrier having been cleared, the next upside target becomes the January 3 high near 2190. The strong Nasdaq action may carry some good news for the rest of the market. Its relative strength ratio is also turning up versus the S&P 500. That's usually a help to the rest of the market. It was the bottom in the Nasdaq/S&P ratio during May that helped launch the latest market rally. The rally is coming at a good time too. That's because the bulk of any summer rally usually takes place during July. This week's upturn doesn't change my view that the cyclical bull market is probably in its final phase. But it does suggest that the market may ready for a decent summer bounce.

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