POSITIVE EARNINGS FORECASTS FROM AT&T, QUALCOMM, AND UPS BOOST STOCKS -- DOW TRANSPORTS AND NASDAQ 100 LEAD STOCK RALLY -- UPSIDE BREAKOUT IN COPPER BOOSTS FREEPORT MCMORAN COPPER & GOLD
THREE EARNINGS LEADERS... The three stocks shown below are rallying sharply on increased profit forecasts and are giving a big boost to stocks. Chart 1 shows AT&T jumping 3% to the highest level in three months. Chart 2 shows Qualcomm gapping up 8% to a three month high as well. QCOM is the biggest percentage gainer in the Nasdaq 100 (more on that later). United Parcel Service is gapping more than 6% higher. Chart 3 shows UPS gapping back above its 50-day average to reach a new two-month high. That's helping make transportation stocks the day's strongest group.
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Chart 1
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Chart 2
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Chart 3
TRANSPORTS AND QQQQ TEST DOWN TRENDLINE... The Dow Transports are up 4% today and are helping lead a market rebound. Chart 4 shows the TRAN trading above both moving average lines which is a positive sign. The same is true of the Power Shares QQQ Trust in Chart 5. Both leading indexes, however, have yet to clear the down trendline drawn over their May/June highs. Whether or not they can do that will help determine if today's rally has enough staying power to extend the summer rally attempt (which is usually concentrated in the month of July).
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Chart 4
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Chart 5
COPPER ACHIEVES SHORT-TERM BULLISH BREAKOUT... Stocks may be getting some aid from a more stable commodity sector. Given the close correlation between stocks and commodities over the last year, any strength is one is normally a positive sign for the other. Chart 6 shows the DB Commodities Tracking Fund (DBC) trading at a one-month high. The fact that the July bottom in the DBC held above its May low has created a short-term positive divergence between it and stocks and may be a positive sign for both. Even more encouraging is the ability of copper to clear its June peak as shown in Chart 7. That's not enough to signal a major bottom (especially with copper below its 200-day average), but is enough to improve its short-term outlook. That stronger outlook in a key industrial metal is giving a boost to Freeport McMoran Copper & Gold which is the day's leader in a strong materials group. Chart 8 shows FCX trading up to a two-month high. Its relative strength line (below chart) has also turned up for the first time in three months. That may be indicating that "short-term" sentiment is turning more positive for stocks and commodities. Their longer-range trend, however, is still in doubt. We may be able to get a better read on both after Friday's close.
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Chart 6
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Chart 7
