MONEY MOVES TO BIGGER STOCKS IN THE DOW AND THE NASDAQ -- MMM IS DAY'S DOW LEADER AS MCDONALDS HITS NEW RECORD -- JUNIPER AND XILINX ACHIEVE BULLISH BREAKOUTS IN NASDAQ MARKET

DOW LEADERSHIP IS RELATIVELY NEW ... The new popularity of the blue chip stocks in the Dow started a little over a year ago. Chart 2 plots a ratio of the Dow divided by the S&P 500. The falling ratio from 2003 through 2005 shows Dow underperformance. After rebounding during the first half of last year, the ratio has trending sideways since mid-year with a slight downward bias. It now looks like the Dow is resuming its relatively new leadership role. I'm not sure if that's just a normal broadening out of the stock market advance, or a sign that investors are starting to move into safer and more stable blue chips. The main message, however, is that some long-neglected Dow stocks may be good places to be shopping right now. 3M may be a good example.

Chart 1

3M GAPS HIGHER ... 3M gapped up to a new 2007 high today on very heavy volume. Its 4.79% gain made it the top gainer in the Dow. The stock appears headed for a test of its fourth quarter high at 81.44. The weekly bars in Chart 3 show how badly this stock has done over the last three years. Its relative strength line has dropped steadily since 2004. That makes it pretty cheap. It would be nice to see its RS line start to climb.

Chart 2

Chart 3

MCDONALDS HITS A NEW RECORD ... Another Dow leader today is McDonalds. Although it hasn't been a market laggard, I thought it worth pointing out that the food stock has just broken through its 1999 high at 47.01 to reach a new record high. That's a lot of hamburgers.

Chart 4

JUNIPER NETWORKS BREAKS OUT ... Although the Nasdaq stocks with the biggest percentage gains are Amazon.com and Apple, there are other Nasdaq stocks achieving bullish breakouts. One of of them is Juniper Networks. Chart 5 shows the stock breaking through its December peak to put it at a new 52-week high. Its relative strength line (versus the Nasdaq) is breaking out as well. That makes it a Nasdaq leader. The weekly bars in Chart 6 show that JNPR broke a major downtrend line late last year and is embarking on a new upleg. Its relative strength line bottomed last summer and has been rising since then.

Chart 5

Chart 6

XILINX BREAKS OUT AS WELL ... Earlier in the week we pointed out a number of upside breakouts in the semiconductor group. Xilinx is another one. Chart 7 shows the stock having broken through its November high. Its relative strength ratio (versus the Nasdaq) has done the same. The weekly bars in Chart 8 are encouraging as well. They show XLNX breaking through a "neckline" in a bottoming formation and trading at the highest level in two years. Its relative strength line (versus the Nasdaq) has just broken a down trendline. That makes Xilinx a relatively new Nasdaq leader. In the search for places to put new money in the market, it seems prudent to consider stocks that are just starting to show new upside leadership after being neglected for awhile. Juniper and Xilinx certainly qualify as do several of the blue chips in the Dow.

Chart 7

Chart 8