STOCKS RESUME UPTREND AS MAJOR INDEXES HIT THREE YEAR HIGHS -- INDUSTRIAL AND TRANSPORTATION LEADERS ARE CUMMINS, ILLINOIS TOOL, AND UNION PACIFIC -- STAPLE LEADERS ARE GENERAL MILLS, HEINZ, AND PEPSICO
STOCK INDEXES REACH THREE-YEAR HIGHS ... All three major stock indexes cleared chart resistance to resume their uptrends. As an added bonus, volume also rose on the price gains. Chart 2 shows the S&P 500 SPDRs clearing the neckline on the "inverse head and shoulders" that Arthur Hill described yesterday. This puts stocks at the highest levels since 2008.
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Chart 1
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Chart 2
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Chart 3
INDUSTRIAL AND TRANSPORTATION LEADERS... The Dow Industrials and Transports had very strong days as both reached new recovery highs. Three stock leaders shown below had a lot to do with today's gains. Chart 4 shows Cummins surging 7% on huge volume to a new record. Chart 5 shows Illinois Tool Works doing the same. In the transportation sector, rails and truckers are providing most of the leadership. Chart 6 shows Union Pacific reaching a record high today as well. It's always a sign of strength when the Dow Industrials and Transports are hitting new highs together.
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Chart 4
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Chart 5
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Chart 6
STAPLE LEADERS ... Consumer staples continue to exert upside leadership. Three recent bullish breakouts in that group are shown below. Charts 7 and 8 show General Mills and HJ Heinz having broken out to new record highs. Their relative strength lines just starting rising a couple of months agao. The same is true of Pepsico. Chart 9 shows that stock having just broken through six-month highs to reach a new two-year high. Healthcare stocks continue to lead as well.
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Chart 7
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Chart 8
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Chart 9
TWO RECENT PHARMA BREAKOUTS ... My April 14 message showed a positive turn in the healthcare sector and big pharma in particular. It showed Bristol Myers Squibb hitting a new nine-year high. The daily bars in Chart 10 show that big pharma leader continue to rally. Another big pharma leader that's been surging on rising volume is Johnson & Johnson. Chart 11 shows that stock breaking out to the highest level in two years. Although investors seem to have regained a more optimistic view of the market, they're still favoring these large defensive stocks that pay dividends.
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Chart 10
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Chart 11
SILVERCORP METALS TURNS DOWN ... I wrote two messages this morning warning that silver appeared to have experienced a "buying climax" yesterday (right at its 1980 high at $50) and appeared vulnerable to more profit-taking. Silver iShares fell nearly 4% today in heavy trading. Part of the reason why I've turned more cautious on silver is because of the downturn in silver shares. Up until this month, silver shares and the metal had been rising together. Chart 12, however, shows Silvercorp Metals peaking in early April and falling throughout the month on rising volume (as the commodity continued to rise). Silver Wheaton did the same. Today's selling pushed SVM below its 50-day average (on rising volume) for the first time in two months. To me, that negative divergence between silver shares and the commodity are a warning that silver is vulnerable to a downside correction. That's also true of gold but probably to a lesser extent.
