RAILS LEAD INDUSTRIALS SPDR TO RECORD HIGH -- GE CLEARS 200-DAY LINE

INDUSTRIALS SPDR INCLUDED TRANSPORTS ... While the Dow Industrials have reached the highest level in four and half years, the Dow Transports are trading at a new record. In today's trading, the transports gained more than 2.0% and were the day's strongest group. In case you're not aware of it, I thought I'd point out that the Industrials Sector SPDR (XLI) includes transportation stocks along with industrials. In other words, the ETF provides a way to benefit from gains in both groups. The inclusion of transportation stocks also explains why the XLI is trading at a new record and is the day's strongest sector ETF. The monthly bars in Chart 1 show the XLI having exceeded its late 2000 peak. The XLI is riding the rails today.

Chart 1

RIDING THE RAILS TO NEW RECORDS... The monthly bars below show three of today's top performers in the transportation group and the XLI and they're all rails. All three are trading at or close to a new record. Charts 3 and 4 show Norfolk Southern and Union Pacific having recently exceeded their 1997/1998 highs. The relative strength ratio for Union Pacific is rising which shouldn't be a surprise given the strength of the group. The rails aren't the only stocks accounting for today's XLI strength. Some of it is coming from the biggest industrial stock in the sector - GE.

Chart 2

Chart 3

Chart 4

GE RISES ABOVE 200-DAY LINE ... The industrial group got some help from General Electric today. Whatever GE does deserves attention since it's the most heavily weighted stock in the Industrials SPDR (21%). The daily bars in Chart 5 show GE climbing over its 200-day average for the first time in two months. Volume is starting to pickup which is an encouraging sign. Chart 5 also shows the stock bouncing off chart support formed during the fourth quarter of last year. Although the stock has been an underachiever, its relative strength line is starting to bounce. Not enough to get overly excited about. But enough to start paying attention. The weekly bars in Chart 6 show that the stock has been consolidating between 36 and 32 over the last year. It's now bouncing off the lower end of that trading range. Its relative strength line may also carry a positive message. Although the stock has been an underperformer since last spring, the RS line has reached levels that produced upturns in the spring of 2003 and 2004 (see arrows). That may be happening again this spring.

Chart 5

Chart 6