GENERAL ELECTRIC SHOWS NEW LEADERSHIP -- FEDEX AND ALEXANDER & BALDWIN LEAD TRANSPORTS HIGHER -- PAYCHEX ACHIEVES BULLISH BREAKOUT ON NASDAQ -- US DOLLAR IS CLOSE TO A RECORD LOW -- THE PROFUNDS FALLING DOLLAR FUND EXCEEDS 2005 HIGHS

GENERAL ELECTRIC IS STARTING TO LEAD ... Today's 2% jump in General Electric has pushed the stock to a new multi-year high as shown in Chart 1. As good as that "absolute" performance is, a bigger part of the GE story is the recent upturn in its "relative" performance. And where the upturn has started from. On Friday, April 27 I wrote a message entitled: "General Electric and Microsoft Are Latest Big Blue Chips to Start Leading". Chart 1 is an updated version of a chart shown in that earlier article. Notice that the RS line had been falling from 2005 to the spring of 2007. As I pointed out in April, that put the RS line at chart support formed during 2002 and 2003. I concluded that "that makes this a logical chart spot for the GE relative strength line to start rising". And that's exactly what it has done since then. But there's more.

Chart 1

GE MONTHLY CHART SHOWS BULLISH BREAKOUT ... The April 27 article also showed that GE was in the process of challenging chart resistance at its early 2002 high on its monthly chart. Today's version of that same chart shows the big blue chip breaking through that barrier to reach a new six-year high. That's a bullish combination of both "absolute" and "relative" strength.

Chart 2

A COUPLE OF TRANSPORTATION LEADERS ... With the Dow Industrials hitting a new record high this week, the Dow Transports are trying to accomplish the same task. Two stocks that are certainly helping are shown below. The top transportation percentage gainer for the week is Alexander & Baldwin (ALEX). Chart 3 shows the stock having broken through its 2005 highs to achieve a major bullish breakout. Its relative strength line, which peaked two years ago, is climbing as well. FedEx also had a strong week. It hasn't reached a new high yet, but is likely to do so. Chart 4 shows FDX moving up toward the top of an "ascending triangle" that started in the spring of 2006. [An ascending triangle is identified by a rising lower line and a flat upper line]. That bullish pattern is usually resolved with an upside breakout.

Chart 3

Chart 4

PAYCHEX BREAKS OUT ... Moving over to the Nasdaq market, one of the week's most impressive stocks is Paychex. The daily bars in Chart 5 show the stock breaking through eighteen-month highs to achieve a bullish breakout. Upside volume has been impressive as well. Like the other charts I've shown above, this one is also just starting to show better relative strength after a long period of underperformance. The monthly bars in Chart 6 put this week's bullish breakout in better perspective. The box encompasses the price action shown in Chart 5. Chart 6 shows that PAYX has maintained a steady uptrend since its 2002 bottom and is now trading at a new six-year high.

Chart 5

Chart 6

DOLLAR IS TESTING ALL-TIME LOWS ... With so many other markets hitting record highs, there's one that's threatening to fall to a record low. That's the U.S. Dollar. Chart 7 shows that the recent drop in the greenback has pushed it dangerously close to its all-time low near 80. That puts the dollar on the critical list. A drop into new lows would have several implications. For one thing, it would make foreign currencies a much better place to be. For another, a record low in the dollar would be bullish for commodities prices and their related stocks, especially precious metals. A weaker dollar would also make foreign stocks more attractive than U.S. stocks. And, finally, it would favor large caps over small caps. Many of those trends are already in place.

Chart 7

FALLING US DOLLAR FUND IS RISING ... I've shown this fund before, but this is an opportune time to show it again. It's the Falling US Dollar ProFund (FDPIX). The mutual fund is designed to rise when the U.S. Dollar Index falls. Chart 8 shows the fund having already exceeded its early 2005 highs (as has the Euro and the Pound). That's a good way to profit from a falling dollar.

Chart 8

XAU INDEX TESTS ALL-TIME HIGH ... One of the market groups that's especially sensitive to dollar trends is precious metals. And, not surprisingly, the long-term trend of the Gold & Silver (XAU) Index a mirror image of the U.S. Dollar. While the Dollar Index is testing its all-time low, the XAU is testing its all-time high. I showed a short-term upside breakout in the XAU this week. A close in record highs would be a lot more bullish. That's likely to happen if the dollar falls to a record low.

Chart 9

NIKKEI 225 NEARS BULLISH BREAKOUT... I've written several times in the past about the close correlations between the gold market and the Japanese stock market. I suspect the reason for their linkage has to do with Japan's battle against deflation. Rising gold prices are considered to be inflationary and are helpful to Japan. That's why Japan's strong price action this week has a double meaning. Friday's 254 (+1.42%) jump in the Nikkei 225 left it just shy of a new seven-year high (Chart 10). If the gold-Japan link continues, a bullish breakout in Japan could also be bullish for bullion and its related stocks.

Chart 10