GOVERNMENT TAKEOVER BOOSTS BANKS, HOUSING, REITS, AND RETAILERS -- DOW DIAMONDS AND S&P 500 SPDRS REGAIN 50-DAY AVERAGE ON RISING VOLUME WHILE NASDAQ 100 LOSES GROUND

HOMEBUILDERS AND REITS HAVE STRONG DAY ... The government's weekend takeover of Fannie Mae and Freddie Mac gave a boost to global stocks today. Among the biggest gainers were those related to housing and real estate. Charts 1 and 2 show the PHLX Housing Index and the Dow Jones REIT Index closing back over their 200-day moving averages. That shows new optimism that the government's action could stabilize the housing and real estate areas. Retailers also had a strong chart day. Chart 3 shows the S&P Retail SPDR (XRT) trading well above its 200-day line. Retailers stand to benefit from falling oil prices and any signs of improvement in the housing sector. A firmer dollar pushed oil and most commodities lower again today.

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BANK STOCKS REACH THREE-MONTH HIGH... Last week, Arthur Hill wrote about the relative strength coming from financial stocks. That's especially true of banks which stand to benefit from the mortgage takeover. Chart 4 shows the PHLX Bank Index gaining more than 6% today as it reached a new three-month high. Its relative strength line did the same. Chart 5 shows the Bank Regional Holders gapping up to its 200-day moving average on rising volume.

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DOW AND S&P REGAIN 200-DAY LINE ... Charts 6 and 7 show the Dow Diamonds and the S&P 500 SPDRS regaining their 50-day average on rising volume. It remains to be seen, however, if either or both can clear their August highs which would be even more impressive. Technology didn't participate in the Monday bounce. Chart 8 shows the PowerShares QQQ Trust losing some ground on rising volume. That detracts from an otherwise positive market day. Let's give the market more time so see if it can build on today's gains.

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