CONSUMER DISCRETIONARY LEADS MARKET HIGHER RETAIL SPDR CLOSES IN ON 200-DAY SOFTWARE HOLDRS AND NETWORKING ISHARES TRACE OUT DOUBLE BOTTOMS SEMICONDUCTOR HOLDRS AND INTERNET ETF BREAK TO NEW HIGHS QQQQ TURNS POSITIVE FOR 2009

CONSUMER DISCRETIONARY SPDR SURGES OVER 4% ... Led by strength in retail and transports, the Consumer Discretionary SPDR (XLY) surged 4.61% on Thursday. Chart 1 shows XLY up almost 29% in the last 13 days. This surge compares to the advance from late November until early December - when XLY advanced 34%. As with early December, the ETF is both overbought and strong. There is a resistance level just ahead from the late-January highs. Above that, XLY has resistance around 23.5 from the Nov-Jan highs and the falling 200-day moving average.

Chart 1

RETAIL SPDR NEARS THE 200-DAY... Chart 2 shows the Retail SPDR (XRT) leading the market higher as it closes in on its 200-day moving average. The ETF surged in November-December, corrected in January-February and surged again in March. While the S&P 500 ETF (SPY) broke its November low in March, XRT formed a higher low to show relative strength in March. The indicator window shows the relative strength comparative, which compares XRT to SPY. Notice how this indicator moved straight up from late November to late March. It did not even dip in January-February. XRT outperformed SPY throughout the last four months. Chart 3 shows weekly prices for some perspective. XRT has now retraced a little less than 50% of the prior decline. After the 40-week moving average, the next resistance zone resides around 26-27 from the 62% retracement and broken support.

Chart 2

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SECTOR LEADERS... Chart 4 shows today's Sector Market Carpet with the industrials, consumer discretionary, technology and materials sectors leading the market higher. Notice that these sectors have the greenest boxes and their stocks averaged the biggest advances. Consumer discretionary and technology are offensive sectors. Their leadership is needed to provide substance for a broad-market advance. The energy, utilities, consumer discretionary and healthcare sectors were the least strong. All four gained on the day, but their gains were relatively small. These sectors are defensive sectors that usually lead when the market is risk-averse. This was not the case today as market participants embraced risk with money moving into the most economically sensitive stocks (consumer discretionary) and the high beta stocks (technology).

Chart 4

A BIG DAY FOR TECHS ... The Semiconductor HOLDRS (SMH), Software HOLDRS (SWH), Networking iShares (IGN) and Internet ETF FirstTrust (FDN) all recorded big gains on Thursday. Chart 5 shows the Networking iShares surging over 5%. The pattern over the last five months looks like a big double bottom with resistance just above 18. Chart 6 shows the Software HOLDRS with a double bottom as well. The ETF is challenging resistance from January-February highs.

Chart 5

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Chart 7 shows the Semiconductor HOLDRS surging over 5%. This group is leading the market with a break above its January-February highs. SMH is positive for the year and trading at its highest level for 2009. Chart 8 shows the FirstTrust Internet ETF (FDN) also breaking above its January-February highs and leading the market higher.

Chart 7

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QQQQ TURNS POSITIVE FOR 2009... Chart 9 shows the major-index ETFs year-to-date. The Nasdaq 100 ETF (QQQQ) turned positive for the year late last week and the ETF is currently up over 5% in 2009. Despite big surges in March, the other three ETFs remain deep in the red.

Chart 9