WALMART NEARS TEST OF ALL-TIME HIGH -- CVS NEARS THREE-YEAR HIGH -- ELI LILLY NEARS 52-WEEK HIGH AND MAY BREAK SEVEN-YEAR DOWN TRENDLINE -- EAFE AND ITALY ISHARES BOUNCE OFF 50-DAY AVERAGE
WALMART NEARS TEST OF 2008 HIGH... In my Market Message on October 20, I showed Wal Mart starting to catch fire for the first time in a long time. The big retailer was been showing new upside leadership in the market. That's not necessarily a good sign for the market since Wal Mart has acted as a defensive holding over the last decade. It's also one of the biggest holdings in the Consumer Staple SPDR. The market still seems to be favoring consumer staples and healthcare which means the investors are still playing defense. The weekly bars in Chart 1 show Wal Mart having recently broken out to the highest level in nearly three years. It's headed for a test of its 2008 intra-day high at 59.58. Its relative strength ratio (solid line) has also turned up since the spring. That's right around the time when money started rotating into consumer staples and other defensive stock categories. The monthly bars in Chart 2 are even more exciting and show Wal Mart heading toward to the top of an eleven-year trading range. It's all-time high was hit at the start of 2000 at 61.65. An upside breakout through that level would be huge for this stock. The relative strength line along the bottom of Chart 2 shows that the stock did better during 2000 and 2008 when the market was under pressure (see arrows). That may be the reason behind its popularity this year.
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Chart 1
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Chart 2
CVS NEARS 52-WEEK HIGH ... CVS/Caremark (CVS) is another leader in the consumer staple space. The daily bars in Chart 3 show CVS having broken through its September high and in position to challenge its spring intra-day high at 39.23. Upside volume has been expanding which is another bullish sign. The weekly bars in Chart 4 show the staple leader nearing a new three-year high as well. It's all-time high was registered during 2008 at 42.61 during the market meltdown of that year. Its relative strength line (below chart) turned up during the spring with the other staples.
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Chart 3
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Chart 4
ELI LILLY NEARS A COUPLE OF IMPORTANT BREAKOUTS ... I've recently been showing some large stocks that have been out of favor for a long time that are starting to attract new attention. I showed Pfizer yesterday which is in that category. Another big pharma that's worth keeping an eye on is Eli Lilly (LLY). The daily bars in Chart 5 show the healthcare leader nearing a test of its summer high near 39. That's not the only important test this stock is about to undergo. The monthly bars in Chart 6 show the stock in a downtrend since 2000. Note, however, that a move above 40 would put it above a resistance line drawn over its 2004/2007 highs. Its relative strength line (below chart) is starting to show a little bounce as well. I'm not sure what's attracting new attention to these big pharma stocks (other than their defensive nature and the fact that they pay dividends). But they're recent chart action tells us someone is buying them.
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Chart 5
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Chart 6
FOREIGN STOCKS REBOUND... Yesterday's message showed foreign stock ETFs threatening their 50-day moving averages. So far, those support lines are holding. Chart 7 shows EAFE ishares showing a little bounce today. With all of the recent focus on problems in Italy, it's also encouraging to see Italy iShares bouncing off its 50-day line. That's lending some support to U.S. markets today. All of those foreign markets, however, remain well below their 200-day moving averages.
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Chart 7
