GOLDMAN SACHS PROFIT SPARKS STOCK BUYING -- FOREIGN STOCKS RESUME UPTREND WHILE S&P HITS NEW HIGH -- OVERSOLD COMMODITY STOCKS HAVE A GOOD DAY
GOLDMAN SACHS SURGES TO RECORD HIGH... The big brokerage firm reported the biggest profit in the history of Wall Street. As a result, the stock gapped to a new high on very strong volume as shown in the daily bars in Chart 1. The monthly bars in Chart 2 are even more impressive. They show the stock having just broken through its 2000 highs to reach a new record. That helped ignite a rally in financial stocks and the rest of the market. A drop in bond yields helped as well. While most groups saw nice gains, the biggest percentage gain came from the Nasdaq market. Commodity stocks, which have been under pressure of late, are also bouncing from oversold conditions and long-term support lines. Global markets had a good day as well.
Chart 1
Chart 2
FINANCIALS HAVE A STRONG DAY ... The Financials Select SPDR (XLF) gained 1.2% today and was one of the market's strongest sectors. The daily bars show the XLF closing over 33 for the first time in its history. The green volume bars also show a bullish bias over the last week. The XLF:S&P relative strength ratio has been rising since the end of January which is a sign that financials are exerting market leadership. Historically that's been a good sign for the rest of the market. Interestingly, the biggest percentage gains came in commodity-related stocks.
Chart 3
ENERGY STOCKS ARE REBOUNDING ... The Energy Sector SPDR (XLE) gained 1.8%. The 20-day Commodity Channel (CCI) Index shows that the XLE is bouncing from an oversold condition with a slight positive divergence. The fact that it's so close to major support near its 200-day moving average may also be attracting new buying. Gold stocks also rebounded today.
Chart 4
FCX AND NEWMONT BOUNCE OFF 200-DAY LINES ... Energy stocks aren't the only ones finding support near their 200-day moving averages. A couple of big metal stocks are as well. Freeport McMoran Copper & Gold was one of the day's top gainers in the materials sector. Chart 5 shows the stock in an oversold condition and bouncing off its 200-day moving average. Newmont Mining shows a similar situation in Chart 6. Since both are included in the Gold and Silver (XAU) Index, their rising action suggests that the decline in the XAU may be about over.
Chart 5
Chart 6
GLOBAL MARKETS STRENGTHEN ... It looks more and more like the sideways action in foreign markets that's characterized the first three months of the new year is being resolved to the upside. The next chart shows the EAFE Index iShares (Europe, Australia and Far East) hitting a new recovery high today. The chart just below it shows Japanese iShares (EWJ) closing back over its 50-day moving average and challenging a down trendline drawn over January/February highs. That pattern looks more like a consolidation (which is bullish) than a reversal pattern. That carries good news for the U.S. market since it suggests that the uptrend in global stock markets is still intact.
Chart 7
Chart 8
NASDAQ 100 BOUNCES OFF SUPPORT -- S&P HITS NEW HIGH ... The market also got some help from the big tech stocks in the Nasdaq 100. Its 1.6% gain made it the day's strongest stock index. And the bounce is coming just in time. The daily chart shows the QQQQ bouncing off chart support along its 2006 low and its 200-day moving average. They represent pretty important support levels. Although the QQQQ has been the weakest of the market indexes since the start of the year, its ability to start bouncing again could give the market some needed lift. Chart 10 shows the S&P SPDRs (SPY) closing at a new 2006 high. Both it and the QQQQ rose on good volume. Combined with strong breadth figures, it was a good day all around. That doesn't tell us how long the current rally will last or how high it will go. It does tell us, however, that the four year bull market hasn't ended yet.
Chart 9
Chart 10
