FALLING OIL, STRONG RETAIL AND HOUSING FIGURES PUSH MARKET HIGHER -- MAJOR INDEXES CLEAR 50-DAY AVERAGES -- EBAY AND GOOGLE LEAD NASDAQ HIGHER -- A LOT OF 200-DAY AVERAGES ARE HOLDING

AIRLINES, RETAIL, AND FINANCIALS LEAD RALLY ... A combination of bullish factors pushed the stock market sharply higher today. One of the those was a big drop in the price of oil. Naturally, that gave a big boost to transportation stocks and airlines in particular. Airlines rose more than 3% on the day. The top percentage gainer was Continental Airlines which is bouncing off its 200-day moving average (Chart 1). Falling oil prices also gave a boost to retailers like Wal Mart which had a strong day. So did Home Depot, which also benefited from a strong February retail report and an unexpected jump in February pending home sales. I recently wrote that HD was closely tied to homebuilders. That group also bounced today. Chart 2 shows Home Depot regaining its 200-day line. The strong housing news also gave a big boost to financial stocks which were the day's top sector. Chart 3 shows the Financial Select SPDR (XLF) bouncing off its 200-day line as well. The three charts shown here represent three of the market's weakest groups since the start of the year. It's interesting to see that all three are finding support at their 200-day moving averages. That's an encouraging sign.

Chart 1

Chart 2

Chart 3

PAPER LEADS MATERIALS HIGHER ... Paper stocks had a strong day. International Paper gained 2.5% to pace a strong materials group. The monthly bars in Chart 4 show IP on the verge of a new two-year high. Assuming it accomplishes that, the next upside target is a test of its early 2004 peak near 42. Its RS line is just starting to climb after five years of underperformance. MeadWestvaco has an even stronger chart pattern. Chart 5 shows the stock breaking a five year "neckline" and on the verge of a new five-year high. It's possible that the recent U.S. sanctions on Chinese paper imports has something to do with the buying.

Chart 4

Chart 5

INTERNET STOCKS LEAD TECHNOLOGY SURGE ... The technology-dominated Nasdaq market had the day's best percentage gain. Within that sector, the top performing ETF was the Internet Holders (HHH). The daily bars in Chart 6 shows that the HHH has been trading over its 50-day line for the last two weeks (while the Nasdaq just accomplished that today). More importantly, the HHH/Nasdaq relative strength ratio (top of chart) has been rising since last August and is hitting a new recovery high today. That makes the internet group a technology leader. A lot of that leadership is due to EBAY.

Chart 6

EBAY NEARS BREAKOUT -- GOOGLE BOTTOMS... Chart 7 shows EBAY climbing 2.7% and apparently on the verge of breaking through overhead resistance around 34 (green line). A close above 34.35 would put the Internet leader at a new 10-month high. The EBAY/Nasdaq ratio (bottom of chart) is on the verge of a bullish breakout as well. That makes EBAY a potential Nasdaq leader as well as an Internet leader. Google is a textbook example of a stock that appears to be ending a downside correction and beginning a new upleg. After "double topping" at 510 in January, the stock fell below its 50-day average in early February before dropping all the way down to its 200-day line. The stock rose above its 50-day line today (on rising volume) after bouncing off its 200-day average twice during March. Add Google to the list of stocks that are bouncing off that long-term support line. That helped the Nasdaq regain its 50-day line and lead the market higher.

Chart 7

Chart 8

NASDAQ 100 REGAINS 50-DAY LINE... Chart 9 shows the Nasdaq 100 Shares (QQQQ) closing decisively over its 50-day moving average today. As was the case with the rest of the market, however, volume was on the light side. Even so, it was a good market day pricewise. The QQQQ gained 1.24% today and was the day's biggest percentage gainer of the major stock indexes. The new Nasdaq leadership comes at a good time. The QQQQ/S&P 500 relative strength ratio (below the chart) has been trending sideways since the start of the year. The green arrow shows that the ratio is bouncing off a support line drawn under its 2007 lows. Nasdaq leadership is a necessary ingredient in any serious market rally. The next hurdle for the QQQQ is the "resistance gap" formed during the last week of February that Arthur Hill has written about (purple arrow). The Nasdaq 100 failed its first attempt to overcome that resistance area. It may get a second chance to do so. Chart 10 shows the S&P 500 SPDRS (SPY) also closing over the 50-day line. There again, volume was disappointingly light. The SPY also has to contend with the "gap" formed over a month ago at the start of the downside correction (purple box).

Chart 9

Chart 10