NEW 2010 HIGH BY DOW INDUSTRIALS KEEPS DOW THEORY UPTREND INTACT -- UPS AND FDX LEAD TRANPORTS HIGHER -- RECENT DOW LEADERS INCLUDE CISCO, DUPONT, GE, INTEL, AND WALMART

TRANSPORTS BROKE OUT LAST WEEK ... I pointed out over a week ago (on Tuesday March 9) that the Dow Transports had broken through their 2010 which was a good sign for the stock market and the economy. That's because transportation stocks are cyclical in nature and do better when investors are optimistic on both. I also pointed out that the two groups leading the transports higher were airlines and rails. Charts 2 and 3 show those two groups also trading at 2010 highs. [Truckers are rallying as well but are still below their January high]. Two new transportation leaders are now emerging in the air freight category.

Chart 1

Chart 2

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UPS BREAKS OUT -- FDX MAY BE NEXT ... UPS and FedEx are two of the main drivers in today's transportation rally. And both are showing strong chart action. Chart 4 shows UPS rallying more than 2% and breaking through its January high. Its relative strength ratio (solid line) shows that UPS is just starting to outperform the S&P 500 after lagging behind for the last year. Although FedEx hasn't broken out yet, it's very close to doing so. Chart 5 shows FDX also surging more than 2% and on very heavy volume. That increases the odds for a breakout over its January high. Its relative strength ratio (top of Chart 5) is now rising for the first time this year. Adding to the bullish tone of the transportation breakout is the fact that the Dow Industrials have broken out as well.

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DOW THEORY UPTREND IS CONFIRMED ... Dow Theory holds that the Dow Transports and Industrials must both hit new highs to confirm an ongoing bull market. The ability of the Dow Industrials to exceed their January high has done just that. That doesn't tell us how far the bull market will run, or for how long. It just confirms that a bull market still exists. The Dow has been a laggard for several months and is one of the last indexes to hit a new high. [The NYSE Composite also hit a new high yesterday]. A lot of this week's Dow strength can be attributed to upside breakouts in some key components.

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DOW LEADERS... The Dow's ability to finally hit a new high is largely based on the strong price of the five stocks shown below. All have rallied to 52-week highs over the last week. In order of relative strength, they include General Electric, DuPont, Cisco, Intel, and Wal Mart. Although Wal Mart has been a laggard for sometime, all five stocks are doing better than the Dow during the first three months of the new year.

Chart 7