NASDAQ INDEXES TEST OVERHEAD RESISTANCE -- TWO NASDAQ LEADERS ARE SIRIUS XM RADIO AND MARVEL TECHNOLOGY -- MICROSOFT IS BREAKING OUT -- BANK AND HOUSING ETFS CONTINUE TO RALLY
NASDAQ INDEXES TEST OVERHEAD RESISTANCE ... The Dow Industrials and S&P 500 indexes have already cleared overhead resistance barriers. The Nasdaq market may be next. Chart 1 shows the Nasdaq Composite Index trying to close above its 200-day moving average. That would be a positive development for it and the rest of the market. Chart 2 shows the PowerShares QQQ Trust (QQQ) challenging its early December intra-day peak at 57.45. The Nasdaq market has underperformed the rest of market since October as reflected in their falling relative strength ratios (below charts). The market usually does better when the Nasdaq is in a leadership role.
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Chart 1
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Chart 2
TWO OF TODAY'S QQQ LEADERS ARE MRVL AND SIRI ... The two biggest percentage gainers in the QQQ are shown below. Chart 3 shows Sirius XM Radio (SIRI) breaking out to a new five-month high and clearing its 200-day average in the process. The second biggest percentage gainer is Marvel Technology (MRVL). Chart 4 shows MRVL surging above its 200-day line on rising volume. Both of their relative strength lines (below charts) are turning up as well.
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Chart 3
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Chart 4
MICROSOFT IS BREAKING OUT... Today's biggest Nasdaq story, however, is the upside breakout taking place in Microsoft which is one of the biggest stocks in that market. The daily bars in Chart 5 show Microsoft (MSFT) having broken through its October high and in the process of challenging its summer high. Volume has also picked up during this week's rally is another positive sign. The weekly bars in Chart 6 also look promising. They show MSFT breaking through a resistance line drawn over the stock's 2010-2011 high in "triangular formation" which has bullish implications.
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Chart 5
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Chart 6
BANK AND HOUSING STOCKS CONTINUE TO RALLY... Last Thursday's message highlighted the fourth quarter upturn in housing stocks and regional banks. I suggested that the two rallies were linked and that the two groups might turn out to be among the biggest surprises of the new year (but not necessarily for us). So far, they're showing signs of living up to that advanced billing. Chart 7 shows the DJ Home Construction IShares (ITB) trying to break through a resistance line drawn over 2010-2011 peaks. The relative strength line (below chart) has already done so. Chart 8 shows the KBW Regional Banking SPDR (KRE) in the process of challenging the same resistance line. Its RS line has already turned up. Any significant improvement in those two important market groups would give a boost to the economy and the stock market during 2012.
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Chart 7
