TREASURY PLAN TO BUY BANK TOXIC ASSETS SENDS STOCKS HIGHER -- FINANCIALS AND HOMEBUILDERS LEAD RALLY -- ENERGY HAS STRONG DAY ON RISING COMMODITIES-- CHINA CONTINUES TO SHOW LEADERSHIP

FINANCIALS LEAD MARKET HIGHER... In a repeat of how we started last week, financials are the leading a strong market rally today. The main catalyst is the Treasury's announcement of a one trillion public-private plan to buy banks' toxic assets. A jump in February existing home sales is also giving a boost to housing. Consumer discretionary stocks are having a strong day as well. Charts 1 and 2 show the Financials and Consumer Discretionary SPDRs trading back over their 50-day averages. Both are showing better relative strength for the first time in a long time. A lot of the strength in the XLY is coming from retailers. Homebuilders are also helping. Chart 3 shows the PHLX Housing Index (HGX) jumping 6% today and also trading back over its 50-day line. The bigger question is whether that will be enough to push the S&P 500 above its 50-day line and chart resistance near 800.

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ENERGY SECTOR SHOWS RELATIVE STRENGTH... Commodity markets are rising along with stocks. Chart 4 shows the DB Commodities Tracking Fund (DBC) rising to the highest level in nearly three months today. Energy is one of the strongest commodity groups. Chart 4 shows the PS Energy ETF (DBE) rising nearly three times as fast. That's giving a big boost to energy shares which are also one the day's strongest groups. The strongest energy group remains oil service. Chart 6 shows Oil Service Holders moving up once again to challenge its 2009 highs. Given the close correlation between stocks and commodities since mid-2008, it makes sense that they should now be rising together.

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CHINA SHOWS NEW LEADERSHIP ... Last Monday, I wrote that relative strength in China was good for global stocks and commodities. That's still the case. Chart 7 shows the iShares FTSE/Xinhua China 25 (FXI) trading close to a three-month high. It's been showing global relative strength since last November. China is a big importer of commodities. China 8 shows the Shanghai Index (SSEC) trading above its 200-day moving average for the first time in a year. China's strength is giving a boost to emerging markets.

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