RETAILERS LEAD MARKET RALLY -- NASDAQ CONSOLIDATION LOOKS TO BE RESOLVING TO THE UPSIDE -- BLUE CHIP INDEXES HIT NEW HIGHS
RETAILERS LEAD RALLY ... Good news from Costco following on the heels of yesterday's strong retail report has ignited the retail sector which is leading the rest of the market higher today. On a percentage basis, the day's strongest ETF is the Retail Holders (RTH) shown in Chart 1. The daily bars show the RTH nearing a challenge of its October high. Upside volume is also impressive. Its relative strength line (below the chart) is starting to rise for the first time in three months. Chart 2 shows a point & figure version of the Retail Holders. The ETF has been on a p&f buy signal since August at 93. A close at 102 or higher would represent another p&f breakout. Given the importance of retail spending at this time of the year, today's buying in retail stocks is helping lift the entire market. That's even true of the Nasdaq market which is also leading the market higher.
Chart 1
Chart 2
NASDAQ RETAIL LEADERS ... We generally think of the Nasdaq as being dominated by technology stocks. It does include some retailers, however, and some of them are helping boost the Nasdaq today. Chart 3 shows Costco jumping more than 2% to touch a new five-month high. Chart 4 shows Staples climbing 2.9% and close to a new 2006 high. Chart 5 shows Bed Bath & Beyond doing the same. A glance at their relative strength lines show that this is the first sign of upside leadership that the Nasdaq has gotten from retailers in several months. The Nasdaq is also getting some help from technology. The SOX Index is bouncing off its 200-day average and is lending some support. The real Nasdaq leadership, however, is coming from the Internet group.
Chart 3
Chart 4
Chart 5
INTERNET INDEX CORRELATES WITH NASDAQ MARKET ... Charts 6 and 7 show the close correlation between the Interactive Internet Index (IIX) and the Nasdaq Composite Index. Both have been consolidating for the last two weeks. And both appear to turning back up again. Chart 6 shows the IIX hitting a new two-week high today. Chart 7 shows the Nasdaq close to doing the same. It now looks like the two-week sideways consolidation pattern in the Nasdaq market has run its course. The 9-day RSI line in Chart 7 is turning up from the 50 level. In a downside correction, the RSI usually falls into oversold territory near 30. In a sideways consolidation, it usually finds support near 50. The latter scenario now appears the more likely. Chart 7 also shows the Nasdaq trading above the upper line in an apparent "pennant" formation. [A pennant is a small "symmetrical triangle" which is usually a continuation pattern]. Chart 8 is a point & figure version of the Nasdaq. The last column of green x's are the result of today's price rise. The Nasdaq has given a preliminary p&f buy signal at 2460. A close at 2470 or higher (which appears likely) would resume its uptrend. That's good news for the rest of the market as well. That's because the market usually does better when the Nasdaq market is rising. Most other major stock indexes are trading at new yearly highs.
Chart 6
Chart 7
Chart 8
POINT & FIGURE BREAKOUTS IN DOW AND S&P 500 ... I recently showed these two charts to demonstrate the value of point & figure charting. Their main value is the precision of buy and sell signals (and in helping to place stoploss protection in case the market turns down). When I showed the Dow Industrial chart last week, it was challenging its recent high. In today's trading, the Dow has broken through (Chart 9). Initial chart support remains at 12100. Chart 10 shows the S&P 500 having also resumed its uptrend. Initial chart support remains at 1390.
Chart 9
Chart 10
