MORGAN STANLEY AND FEDEX LIFT OVERSOLD MARKET AS MAJOR MARKET INDEXES TRY TO RECLAIM 200-DAY AVERAGES
MORGAN STANLEY LEADS BROKERS HIGHER ... Strong second quarter earnings by Morgan Stanley has pushed the brokerage stock up nearly 5% today and is leading a rally in that group and the market in general. Chart 1 shows the stock gapping back over its 200-day moving average on rising volume. Chart 2 shows the Broker/Dealer Index also regaining its 200-day line. The relative strength line in Chart 2 shows the brokers leading the market lower since late April. Today they're helping to lead it higher. So are transportation stocks led by FedEx.
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FEDEX CLEARS 50-DAY AVERAGE... Strong second quarter earnings are also pushing FedEx nearly 5% higher today on strong volume. The daily chart shows the stock trading above its 50-day moving average. That's giving a big boost to transportation stocks which are among the day's biggest gainers. Chart 4 shows the Dow Transports trading back over their 50-day line as well. Transports have been a pillar of market strength since the beginning of the year. Airline stocks are also acting stronger (Chart 5).
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MARKET BOUNCES FROM OVERSOLD CONDITION... The market is also being lifted today from a short-term oversold condition as shown on the next three charts. Up to today, the Dow has been the only major market index to stay over its 200-day moving average. Chart 6 shows it moving up toward a test of its 50-day line. The short-term indicators are turning positive. The 9-day RSI line is moving above 50 for the first time in a month and the daily MACD lines are turning up. We see the same improvement on the S&P 500 (Chart 7). The daily MACD histogram has just moved over the zero line. The same is true for the Nasdaq Composite. Chart 8 overlays the MACD lines on the Nasdaq daily chart and shows them turning up. Today's action could be the start of a much-anticipated market bounce. That possibility will be increased if most market indexes can reclaim their 200-day lines. Unfortunately, most weekly indicators are still negative.
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